07272017Thu
Last updateWed, 26 Jul 2017 7pm

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Shale Sector to Be Cash Flow Positive by 2020

The tight oil sector has struggled to generate positive cash flow since 2010. Last year, only one company in the sector posted positive cash flow. But there is light at the end of the tunnel. Wood Mackenzie’s new report "When will tight oil make money?" calculates that the five largest tight oil players could become cash flow positive by 2020.

But it is not all good news. Tight oil returns are highly sensitive to oil price, and in the event that oil prices remain flat or even fall (not our base case view), only the best operators, in the best plays can expect to make returns.

The report also identifies tight oil’s two key advantages: the scale of the opportunity and capital investment flexibility. 


U.S. Chemical Production Moved Higher in June

According to the American Chemistry Council (ACC), the U.S. Chemical Production Regional Index (U.S. CPRI) edged higher by 0.3% in June, following a 0.3% gain in May, and a 0.4% decline in April, as measured on a three-month moving average (3MMA) basis. During June, output grew in all regions except the Ohio Valley which was flat and the Gulf Coast which edged lower.

Also measured on a 3MMA basis, chemical production was mixed. There were gains in the production three-month moving average output trend of consumer products, pharmaceuticals, other specialty chemicals, pesticides and organic chemicals. 

U.S. Fuel Ethanol Production Continues to Grow in 2017

Through the first six months of 2017, U.S. weekly ethanol production averaged 1.02 million barrels per day (b/d), an increase of 5% over the same period in 2016. On a weekly basis, U.S. ethanol production set a record of 1.06 million b/d in the week of January 27, 2017, and it has averaged near or above 1 million b/d in every week of 2017 except for a few weeks in April, when ethanol plants typically undergo seasonal maintenance. If ethanol production remains relatively high through the second half of the year, as EIA’s Short-Term Energy Outlook expects, 2017 will set a new record for annual fuel ethanol production.

U.S. ethanol plant capacity increased for the fourth consecutive year in 2017, reaching a nameplate capacity of approximately 15.5 billion gallons per year in January. Total ethanol production is expected to reach 1.02 million barrels per day in 2017, a rate equivalent to 15.8 billion gallons. Annual ethanol production is able to exceed capacity for two reasons: new production capacity has likely been added since the January 2017 capacity survey date, and many ethanol plants are able to operate at levels beyond their nameplate production capacity. 

LyondellBasell to Build the World's Largest PO/TBA Plant

LyondellBasell has made the final investment decision to build the world's largest propylene oxide (PO) and tertiary butyl alcohol (TBA) plant in the Houston area. The project is estimated to cost approximately $2.4 billion, representing the single-largest capital investment in the company's history. Once in operation, the plant will produce an anticipated 1 billion pounds (470,000 metric tons) of PO and 2.2 billion pounds (1 million metric tons) of TBA annually.

The proposed location for the PO/TBA plant is the LyondellBasell Channelview Complex located in Channelview, TX. The associated ethers unit, which will convert TBA to oxyfuels, is proposed for the company's Bayport Complex near Pasadena, TX. 

EPA Selects Projects for Water Infrastructure Loans

The EPA is inviting 12 projects in nine states to apply for Water Infrastructure Finance and Innovation Act (WIFIA) loans. These potential applicants were selected from a group of projects that represent large and small communities from across the U.S. that submitted letters of interest to EPA in April 2017.

In FY2017, the WIFIA program received $25 million in funding, including an additional $8 million in the Consolidated Appropriations Act of 2017. This year’s projects will also leverage more than $1 billion in private capital and other funding sources including EPA’s State Revolving Fund (SRF) loans, to help finance a total of $5.1 billion in water infrastructure investments. The selected projects demonstrate the broad range of project types that the WIFIA program can finance including wastewater, drinking water, stormwater and water recycling projects. 

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