ONEOK Acquiring Magellan Midstream in $18.8 Billion Deal
ONEOK has agreed to buy U.S. pipeline operator Magellan Midstream Partners in a cash-and-stock deal valued at about $18.8 billion, bringing natural gas-focused ONEOK into transporting refined products and oil.
The deal will give ONEOK, until now a transporter of natural gas liquids and natural gas, access to Magellan’s refined products and crude oil transportation business. The combined company will have 44% of its business in NGLs, and 21% in refined products, according to a presentation.
“The combination of ONEOK and Magellan will create a diversified North American midstream infrastructure company with predominately fee-based earnings, a strong balance sheet and significant financial flexibility,” ONEOK CEO Pierce H. Norton II, who will head the combined company, said in a statement.
The deal comes as U.S. natural gas prices have struggled this year because of oversupply concerns. Crude prices have traded off in 2023 on potential recession fears, although not as badly has natural gas.
It will create a “more resilient energy infrastructure company that is expected to produce stable cash flows through diverse commodity cycle,” according to the company’s statement.
The deal, expected to close in the third quarter of 2023, should be accretive to ONEOK’s earnings per share beginning in 2024, with EPS accretion of 3% to 7% per year from 2025 through 2027.
ONEOK will pay $25 and 0.6670 shares of ONEOK common stock for each outstanding Magellan common unit, representing a premium of 22% based on Magellan shares’ closing price on May 12. The buyer will also assume Magellan’s $5 billion in debt.
Analysts at Raymond James said the combined company would be considered “top of the class from a scale and diversification perspective.”
Permian Oil Pipelines Filling Up on Rising Output, Exports
Oil pipelines that had run half-empty from the Permian Basin to Houston are filling again as rising output has absorbed most of the space on the lines to the main south Texas export hub in Corpus Christi.
U.S. crude exports climbed to a record of about 4.5 MMbpd in March, spurred by recovering Chinese demand and competitive pricing for U.S. oil. Sanctions on Russian crude purchases by the European Union and Britain also have boosted demand.
Pipelines that move oil from the Permian to Corpus Christi are more than 90% full as buyers snap up the light, sweet oil, encouraging shippers to seek alternate routes, analysts said. Pipeline operators are proposing to expand capacity to Corpus Christi. Enbridge is considering a 200,000-bpd expansion to its 900,000 bpd Gray Oak pipeline and later add an extension to Houston.
Houston, previously the top U.S. export hub before an expansion in capacity made Corpus Christi the main export hub, has ample room. Its pipeline utilization averaged 57% in 2022, up from 49% the year before, according to researcher East Daley Capital. That paves the way for new production from the Permian basin to flow to Houston.
Permian production was projected to hit a record 5.7 MMbpd in May, topping Canada’s average daily crude output last year, according to the U.S. Energy Information Administration. Overall U.S. oil output is projected to touch an all-time high of 12.53 MMbpd this year on rising demand and prices.
Plans to widen the Houston ship channel to reduce congestion and a 250,000-bpd expansion of capacity at Exxon’s Beaumont refinery will help boost flows to Houston, analysts said. Proposed oil export terminals around Houston will add to future flows, they added. Of the four proposed crude oil export terminals planned for the U.S. Gulf Coast this decade, two are off Freeport, about 60 miles (97 km) south of Houston, and a third east of Houston.
New York State Bans Natural Gas in Some New Construction
New York has become the first U.S. state to pass legislation banning the use of natural gas for heating and cooking in some new buildings, a plan designed to reduce carbon emissions but opposed by industry groups as excessive and costly.
“A first-in-the-nation, unconstitutional ban on natural gas hookups in new construction will drive up utility bills and increase housing costs,” Republican New York State Sen. Robert Ortt said in a statement.
The provisions will require new buildings to be constructed with only electric hookups for appliances and utilities beginning in 2025. The law will go into effect for buildings with fewer than seven stories beginning in 2026. The requirements will kick in for taller buildings by 2029, according to the New York Times.
Hospitals, critical infrastructure and commercial food establishments will be exempt from the requirements.
Buildings where the local grid is not capable of handling the load will also be exempt from the new law. Existing buildings and appliances will not be affected by the legislation.
Both the Democratic-led Assembly and Senate later approved the provisions, which are included the state’s $229 billion budget. Gov. Kathy Hochul and lawmakers agreed to the outlines of the spending package prior to the vote.
Dozens of cities around the United States have adopted or are considering policies that ban or discourage natural gas in new buildings to address public health and climate concerns. They have been met with strong resistance from gas industry groups and restaurant and appliance lobby groups that argue those concerns are overblown.
Iraq Asks Turkey to Resume Northern Oil Export Pipeline
Iraq has sent an official request to Turkey to restart oil export flows through a pipeline that runs from the semi-autonomous Kurdistan Region in northern Iraq to the Turkish port of Ceyhan. But there were no signs Turkey was taking steps to restart the pipeline after a roughly two-month shutdown.
“Both the Kurdistan Region’s Ministry of Natural Resources and Iraq’s Ministry of Oil are reportedly waiting for Turkey’s response before resuming oil exports,” a Kurdistan Regional Government (KRG) statement said.
Turkey halted Iraq’s 450,000 bpd of northern exports through the Iraq-Turkey pipeline on March 25 after an arbitration ruling by the International Chamber of Commerce (ICC). The ICC ordered Turkey to pay Baghdad damages of $1.5 billion for unauthorized exports by the KRG between 2014 and 2018.
Iraq’s request to Turkish state energy company BOTAS came after traders buying crude from the Kurdistan region signed contracts with Iraq’s state-owned crude marketer SOMO following weeks of discussions, according to four sources familiar with the matter.
Producers in the region have called for the KRG to prioritize debt repayment, making transparency and regularity of payments conditions for new investments and maximum export flows once the pipeline reopens, a separate industry source said.
Congo, Uganda Discussing Use of 898-Mile Crude Pipeline
The Democratic Republic of Congo is in discussions with neighboring Uganda for possible use of the east African country’s planned crude oil pipeline to export petroleum, Congo’s hydrocarbons ministry said.
Uganda is developing the $3.5 billion 898-mile (1,445-km) East African Crude Oil Pipeline (EACOP) that will start from oil fields in its Albertine rift basin on its western border with Congo to Tanzania’s Indian Ocean seaport of Tanga. The pipeline is for transporting Uganda’s crude to international markets when the country starts production in 2025.
Congo’s Ministry of Hydrocarbons said in a Twitter statement that its minister Didier Budimbu met Uganda’s Energy Minister Ruth Nankabirwa Ssentamu, with discussions involving access to the pipeline.
“Uganda acknowledged the crucial requirement of DRC to access the East African Crude Oil Pipeline (EACOP) for the transport of crude oil to be produced from the oil exploration blocks located in the Albertine Graben in the Democratic Republic of Congo,” the statement read.
Congo and Uganda share the oil-rich basin of Albertine Graben. Technical teams from both sides would discuss and prepare reports to be presented to the two ministers who would then brief the countries’ presidents on signing a Memorandum of Understanding, according to the statement.
A spokesperson for Uganda’s energy minister confirmed the talks and said the EACOP had been designed for potential use by Uganda’s neighbors including Congo and South Sudan.
Chile, Argentina’s YPF Ink Deal on Trasandino Imports
Chilean state oil company National Petroleum Company (ENAP) said it signed a temporary agreement with Argentine oil firm YPF in May to import crude through the Trasandino pipeline, a key step for both countries’ trade.
The Trasandino pipeline, known as OTA-OTC or OTASA, connects the Vaca Muerta shale formation in the western Patagonian province of Neuquen with Chile, and is co-owned by ENAP, YPF, and Chevron Corp.
Vaca Muerta, the world’s second largest shale gas reserve and fourth largest for shale oil, is seen as key to Argentina’s push to lessen reliance on pricey energy imports.
The contract, which is valid for 45 days, would enable the Chilean firm to buy 41,000 bpd between May and June.
ENAP said in a statement that, although the deal is a “regular purchase operation,” it is an initial step for the renewal of “energy-oil interconnection between the two countries in the long term.”
Italy, Germany, Austria Supporting Hydrogen Pipeline
Energy ministries of Italy, Germany and Austria have signed a joint letter of support for the development of a hydrogen-ready pipeline between North Africa and Europe, Italian gas grid operator Snam said.
Snam, one of the companies behind the project, said the three countries expressed their backing for related infrastructure projects to obtain the status of European Union Project of Common Interest (PCI), which would give them access to certain EU funds and fast-tracked permits.
Europe is attempting to scale up its production and imports of renewable hydrogen – a fuel manufactured using renewable electricity, which countries are betting on to cut fossil fuel use in industrial processes like steelmaking.
The so-called SouthH2 Corridor would connect North Africa, Italy, Austria and Germany, allowing renewable hydrogen produced in the Southern Mediterranean to reach European consumers, Snam said.
The 2,050-mile (3,300-km) project is led by four major European transmission system operators: Snam, Trans Austria Gasleitung (TAG), Gas Connect Austria (GCA) and bayernets in Germany.
With a hydrogen import capacity of more than 4 million tonnes per annum (Mtpa) from North Africa, the pipeline could deliver 40% of an EU hydrogen import target set for 2030 and could be operational by as early as that year, Snam said.
PetroVietnam Gets Nation’s First LNG Import-Export Approval
PetroVietnam Gas said it has received a certificate from local authorities to become the country’s first company eligible to import and export LNG.
The certificate from the Ministry of Industry and Trade will allow the company to make its first LNG imports this year, the company said in a statement.
PetroVietnam Gas said it had completed the construction of an LNG terminal in the southern province of Ba Ria Vung Tau with an initial capacity of 1 Mtpa of LNG per year. It aims to raise the capacity to 3 Mtpa.
The company has also issued a tender seeking to buy Vietnam’s first LNG cargo of 50,000 tons to 70,000 tons to test run the terminal.
Denmark, Sweden Sign Solidarity Agreement on Gas Supply
Denmark and Sweden have signed an agreement on mutual support in case of gas shortages, the energy authorities of the two countries said.
In the case of gas shortages or disruptions, Denmark will help secure supply to Swedish customers protected by the agreement, including about 30,000 households, hospitals and emergency services, Sweden’s energy authority said.
“The agreement we have signed today reflects the great work and cooperation that has taken place in the wake of Russia’s invasion of Ukraine,” the director of the Danish Energy Authority, Kristoffer Bottzauw, said in a separate statement.
“No country in the EU or the Nordic region can solve the energy supply crisis alone,” Bottzauw added.
Most of the natural gas used in Sweden comes via a pipeline from Denmark.
Poland Boosting Military Protection for Baltic Pipelines
The Polish government approved draft legislation in May that would allow the military to sink an enemy ship targeting Baltic Pipe, a key gas pipeline from Norway via the Baltic Sea, following NATO’s warning that Russia might sabotage undersea energy infrastructure.
In “exceptional situations,” and when other options had been exhausted, the military would be allowed to foil a terrorist attack by sinking an enemy ship or airship, the government said.
A key ally of Ukraine and a hub for deliveries of weapons to Kyiv, Poland says it has regularly found itself the target of Russian espionage. The country has been cut off from Russian gas supplies a year ago and relies on LNG imports and pipeline supplies from Norway.
The government said a permanent base for coast guard units would be established in Swinoujscie port, where a terminal for importing LNG is located.
In April, Warsaw established a temporary 200 meters exclusion zone around the terminal.
TC Energy Finishes Oil Recovery from Keystone Spill
TC Energy has finished recovering oil from a rural Kansas creek where its Keystone Pipeline spilled 14,000 barrels of oil in December, the company said.
The pipeline operator expects to remain onsite until the third quarter of this year to finish restoring the Mill Creek shoreline, TC Energy said in a statement.
The Keystone spill was the biggest U.S. oil spill in nine years and prompted a 21-day shutdown of a portion of the 622,000-bpd pipeline, which ships crude from Alberta to U.S. refineries.
In April, the Calgary-based company released the findings of an investigation that found the oil spill was caused by a progressive fatigue crack that originated during construction of the pipeline. P&GJ