Industry News Archives - q2technologies

Energy Outlook into 2025. Trends reshaping the Oil & Gas Industry

The global energy landscape is undergoing a transformative shift, with 2025 bringing both challenges and opportunities for the oil and gas industry. Key factors such as changes in global demand, technological advancements like artificial intelligence (AI), and innovations in logistics are reshaping energy’s future. From evolving oil demand trends to AI-driven safety enhancements in H2S management, the industry is adapting to new realities. To see how AI is improving H2S safety, check out our AI-driven solutions. To gain more insight into the impact of sulfur and carbon on the oil and gas industry, check out our detailed analysis here.

What Are the Current Global Oil Market Trends?

What’s Causing the Slowdown in Oil Demand?

The pre-pandemic days of explosive oil demand growth are fading. While demand is still expected to increase in 2025 (by an estimated 1.3 million barrels per day), this falls short of both the historical average and the rebound seen post-pandemic. This slowdown is attributed to several factors, including:

Reduced pent-up demand: The initial surge after pandemic restrictions has subsided.
Slower global economic growth: Economic conditions are not as robust as in previous years.
Clean energy adoption: The rise of electric vehicles and other renewable energy sources is impacting oil consumption.
China’s shifting energy landscape: The adoption of electric and hybrid vehicles, increasing use of LNG trucks, and weak industrial growth in China are further contributing to the slowdown.

Why Is Oil Supply Increasing Despite Lower Demand?

Despite the demand slowdown, global oil production is anticipated to rise by 1.6 million barrels per day in 2025. This increase is primarily driven by production gains in advanced economies and Latin America and the Caribbean. This shift in the production landscape, with non-OPEC+ countries playing a larger role, could lead to a significant oil surplus in 2025, potentially exceeding 1.2 million barrels per day. This surplus, combined with high spare capacity, could put downward pressure on oil prices. While geopolitical tensions in the Middle East could temporarily spike prices, a full unwinding of OPEC+ production cuts could lead to a significant price decline.

Closer to Home

US Natural Gas Storage: Well-positioned for winter

The good news for US consumers is that natural gas storage is forecast to remain above the five-year average (2019-2023) throughout the winter heating season. In fact, current natural gas injections into storage are the highest since 2016. This indicates a well-supplied market heading into the colder months.

US Natural Gas Prices: Potential Winter Increas

While ample storage provides some comfort, it’s important to note that this surplus is expected to shrink naturally as winter progresses. This could lead to a price increase for Henry Hub natural gas, potentially rising from $2.00/BTU to $3.00/BTU. This price hike could last until spring 2025.

US Electricity Consumption: Winter drives demand

Residential electricity consumption is directly tied to weather patterns. The EIA forecasts a potential 3% increase in usage this winter compared to last year. Although the early part of the season saw mild temperatures in November, the overall expectation is for a colder winter. This increase in demand, coupled with a potential decrease in natural gas storage, could contribute to the anticipated price rise.

What Is the Role of Artificial Intelligence in Oil and Gas?

Major Trends to look for in 2025 for Oil and Gas

Predictive Maintenance: AI-powered systems can analyze input and output data from machinery and other equipment to predict potential failures before they occur. This proactive approach extends equipment life and reduces the need for costly replacements.
Enhanced Exploration: AI can analyze massive datasets of geological data, leading to more efficient and successful exploration efforts. This reduces the risk of dry holes and optimizes resource allocation.
Production Optimization: AI algorithms can optimize drilling operations, monitor reservoir conditions, and adjust production parameters in real-time. This leads to increased production, reduced energy consumption, and improved resource recovery.
Reduced Emissions: AI can enhance safety by monitoring equipment, detecting anomalies, and alerting operators to potential hazards. Additionally, it can help optimize energy consumption, reduce emissions, and improve overall environmental performance.

The Future of AI in Oil and Gas

As AI technology continues to advance, its potential applications in the oil and gas industry are vast. Future developments may include:

Autonomous Operations: AI-powered systems could enable autonomous drilling and production operations, reducing human intervention and increasing efficiency.
Advanced Analytics: AI can provide deeper insights into complex data, enabling more informed decision-making and optimizing operations.
Enhanced Sustainability: AI can help identify opportunities to reduce carbon emissions, improve energy efficiency, and promote sustainable practices.

Looking beyond 2025, the role of AI in the oil and gas industry is only expected to grow.

What Is the Impact of IoT on Oil and Gas Logistics?

As a leading chemical manufacturer and provider of products designed to treat H2S, mercaptan, and sulfur-based contaminants, we recognize the transformative power of technology. Our focus for Q2 2025 is to further innovate our distribution network by leveraging the Internet of Things (IoT). This powerful network of connected devices offers significant advantages for optimizing supply chains, improving efficiency, and enhancing customer satisfaction.

Key Benefits of IoT in Logistics:

Enhanced Safety and Security: IoT devices can monitor vehicle performance, driver behavior, and environmental conditions in real-time, ensuring safe and secure point-to-point delivery. Tamper-proof sensors on storage vessels can be monitored to protect product integrity.
Improved Inventory Management: IoT sensors can track product shelf life, manufacturing dates, and inventory levels, optimizing warehousing efficiency and minimizing waste.
Streamlined Logistics: By analyzing data from various sources, including traffic conditions, weather forecasts, and delivery schedules, IoT can optimize route planning, de-bottleneck manufacturing processes, and ensure on-time deliveries.
Real-time Visibility: IoT provides real-time tracking of shipments, allowing for proactive monitoring and timely resolution of any issues.
Cost Reduction: IoT-enabled optimization of logistics operations can lead to reduced costs through improved efficiency, reduced waste, and minimized downtime.

Final Thoughts: How Is Q2 Technologies Preparing for 2025?

As we begin 2025, the oil and gas industry is poised for a year of both challenges and opportunities. Slower demand growth, increasing supply, and advancements in technology like AI and IoT are reshaping the energy landscape. While uncertainties remain, proactive strategies and innovative solutions will be critical for navigating the road ahead.

At Q2, we’re not just observing these trends—we’re leveraging them. With a steadfast commitment to innovation, operational excellence, and sustainability, we’re ready to meet the demands of a dynamic energy market. Whether through advanced H2S treatment technologies or smarter logistics powered by IoT, we’re prepared to deliver solutions that drive efficiency and value.

2025 is here, and at Q2, we’re ready to embrace it. To learn about our proactive response to the potential dock worker strike and how it may affect supply chains, check out the details here. Also, explore why it might be the time for WTI Houston to become the global oil price benchmark.

Sources:

https://www.eia.gov/outlooks/steo/pdf/steo_full.pdf

https://blogs.worldbank.org/en/opendata/growing-oil-supplies-amid-moderating-demand-and-geopolitical-unc#:~:text=Global%20oil%20demand%20growth%20continues,liquefied%20natural%20gas%20(LNG)

https://www.eia.gov/todayinenergy/detail.php?id=63864

https://moontechnolabs.com/blog/ai-in-oil-and-gas/

https://www.dwenergygroup.com/ais-role-in-oil-and-gas-exploration/#:~:text=AI%20and%20the%20Future%20of,cost%20savings%2C%20and%20greater%20returns

https://www.datategy.net/2024/01/09/ai-in-oil-exploration-maximizing-discoveries-minimizing-costs/

https://acropolium.com/blog/embracing-iot-in-transportation-and-logistics-to-boost-supply-chain-visibility/#:~:text=IoT%2C%20or%20the%20Internet%20of,and%20used%20to%20optimize%20operations

East and Gulf Coast Dock Worker Strike: Will It Affect the Oil and Gas Industry?

10/3/2024 update: The International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USXM) have reached a tentative agreement, extending their Master Contract until January 15, 2025, and resuming normal operations. Despite the strike’s short duration, at least 38 container vessels are backed up, significantly impacting shipping and logistics. The backlog is expected to take 15 to 21 days to clear, according to estimates from the Department of Commerce.

U.S. Port Disruption and Supply Chain Risks

Forty-seven thousand dockworkers represented by the International Longshoremen’s Association went on strike at midnight on October 1, 2024. The ports they serve stretch from Maine to Houston accounting between 43%-49% of all U.S. imports. A prolonged strike at the ports could lead to major supply-chain disruptions right before the holiday season and potentially have political fallout as the November election nears. J.P. Morgan analysts estimate it would cost the U.S. economy between $3.8 billion and $4.5 billion a day. With this kind of impact, analysts do not expect the strike to last longer than a week, but the ramifications may last much longer.

Nine of the 10 most active ports are on the East or Gulf coasts, seven of which are Texas or Louisiana based. However, for this particular strike, according to the API, crude oil imports and exports will not be directly affected, as their workforce is administrated by separate contracts. This strike is more focused on imports of food, vehicles, heavy machinery, construction materials, chemicals, furniture, clothes and toys.

Crude and NGLs: Key Factors to Watch, even if Indirect

While crude oil may not be directly disrupted, the ports of Houston, South Louisiana, and Corpus Christi are heavily tied to the energy sector, meaning indirect effects are inevitable. The energy industry depends on a wide range of secondary markets that rely on global supply chains, including:

Chemical manufacturing
Machined parts and equipment
Vehicles and heavy machinery
Construction materials

Even without direct port closures for crude, these interdependent sectors could experience higher operating costs. For example:

Demurrage charges may not increase dramatically, but
Subsidiary costs such as more expensive machinery or materials will drive up energy prices over time.

Triazine Supply Chain Vulnerability.

Triazine, a chemical essential in natural gas treatment, agriculture, and wastewater management, is highly exposed to global supply chain risks.

If triazine or its raw materials move through East or Gulf Coast ports, the ongoing strike could cause significant delivery delays and shortages.
The U.S. both imports and exports triazine. While domestic production is strong, many industries still depend on international supply.
Major chemical producers like BASF and Dow Inc. play key roles in both production and trade.
Most domestic manufacturing is concentrated in Texas, making the region particularly sensitive to disruption.
The Texas freeze in February 2022 demonstrated how unexpected events can cripple supply chains recovery took months. A major port strike could lead to similar long-term instability.

Alternative Solutions and Supply Chain Planning

Alternatives during prolonged outages may find shippers seeking deliveries to West Coast ports; however, diverting shipments may prove to result in even longer delays. If warehouse inventories run out due to a prolonged strike, companies may simply seek non-triazine solutions. For example, when considering treating H2S in crude oil or natural gas, taking into account the product’s supply chain exposure should be studied. Commodity based products such as triazine could be greatly impacted in port strike scenarios.

A prolonged dock worker strike especially along the Gulf Coast ports may not see direct impact to crude and NGL import and exports, but energy prices could ultimately be impacted by the long supply chain effects due to the other impacted industries that are served along these busy ports. A more discrete impact will likely affect Triazine availability, resulting in price volatility due to supply chain bottlenecks and increased transportation costs.

If you’re concerned about your H₂S scavenger supply or need help evaluating alternatives, contact us to speak with our team.

Sources:

https://www.psmarketresearch.com/market-analysis/triazine-market-report

Getting Ready for Hurricane Season

2021 was a rainy year, ranking as the third most active hurricane season in history as well as the third costliest, with a total of nearly $81 billion in damage. Hurricane Ida by itself, swept through Louisiana and much of Mississippi, forcing the shut down of refining operations and oil production in the Gulf of Mexico, and had a cost of over $75 billion in damages. Ida disrupted much of the chemical supply chain when it hit, leading to H2S scavenger raw material shortages.

[For 2022 ] An early outlook (…) forecasts an active North Atlantic hurricane season, which could affect oil and gas supply due to shut-in production at platforms in the U.S. Gulf of Mexico (HART Energy, 2022).

As meteorologists forecast an active hurricane season, producers, midstreamers, refiners, and chemical treatment companies must prepare for what could be a replay of last year’s heavy storms. For Q2 Technologies, it is essential for us to be ready; we know that these events can cause driver shortages, road/route closures, and production shut-ins at plants, which makes it extremely difficult to manufacture, deliver, and consequently treat oil and gas production. Despite hurricane season in full swing (the season actually starts June 1st lasting until November 30th), production at the wellhead does not stop, therefore Q2 Technologies is making the necessary arrangements to plan accordingly so our critical product is available during this uncertain time.

As a trusted chemical provider for our clients, we ensure that sufficient levels of our H2S removal products are securely stored close to our clients’ assets in anticipation of hurricane season.

We’ve taken the necessary steps to manufacture a sufficient amount of additional product and have coordinated ahead of time with our multiple trucking logistics partners to get product to location or storage. We stage at least 1 month worth of chemical inventory in West Texas and the Texas coast to ensure that any weather related supply disruptions will not jeopardize our delivery capability.

How do we manage to continue to deliver our product when a hurricane is imminent? This is actually a very simple answer: by being prepared, by manufacturing the product in advance, and before production is threatened. Having sufficient raw material from a diversified supplier pool at multiple manufacturing sites mitigates our production risk. Having multiple manufacturing sites allows us to deliver to multiple basins. We have been very strategic in our partnerships over the last 21 years, seeking partners with the highest integrity, and facilities with world-class blending that have easy access to major highways and thoroughfares.

Adaptability is also fundamental, depending on conditions, locations and our clients’ needs, we provide a wide range of different vessel formats, allowing our product to be ready for shipment in containers of all kinds of shapes and sizes: ISOs, Drums, and Totes.

Working at multiple manufacturing sites and being prepared with a fleet of trucks and carriers is critical. Multiple carriers are key for successfully delivering chemical loads. If, for any reason, one is delayed, another one may come to the rescue; partnering with different trucking companies has allowed us in previous years to successfully deliver our product and treat our clients’ crude oil and gas in a regular manner.

In conclusion, to seamlessly continue treatment in multiple basins while hurricane threats arise, we have implemented a ‘planning ahead’ mindset. Learn more about how Q2 Technologies is increasing inventory and logistical capabilities amid the 2022 hurricane season to ensure uninterrupted chemical supply for our clients

Multiple raw material providers
Several manufacturing sites close to major highways and thoroughfares
Diverse vessel sizes
Multiple transportation services
And stockpile field ready inventory

If you’re interested in our multiple H2S removal products, we’d be happy to have a chat with you! Contact us or give us a call +1 832-328-2200.

Sources:

https://www.api.org/news-policy-and-issues/hurricane-information/hurricane-preparation

https://www.hartenergy.com/ep/exclusives/gulf-mexico-oil-and-gas-industry-faces-active-hurricane-season-200357

https://www.accuweather.com/en/hurricane/accuweathers-2022-atlantic-hurricane-season-forecast/1164507

https://en.wikipedia.org/wiki/Hurricane_Ida

What Is the Outlook for Triazine After the 2021 Texas Freeze?

Deep Freeze February 2021

Texas and much of Louisiana experienced an unprecedented extended freeze that shocked nearly every facet of modern living in the region from busted water lines and electrical outages to major industrial systems going offline.

Historical Texas Freeze, February 2021

Why Did the Triazine Market Collapse in 2021?

The chemical industry that supports the Oil & Gas industry, especially for Producers that use triazine or other amine-base chemistries to treat hydrocarbons, also felt the effects of this storm. Triazine based chemistries have been traditionally used to scavenge hydrogen sulfide (H2S) from natural gas and certain liquid hydrocarbon streams. The storm and summer have passed, but the long-term ramifications are still playing out, and for some the supply crunch is very much ongoing. Relief is on the horizon but not fast enough for some. Here’s a bit of history as to why we are seeing this near-commodity market acting the way it is and some forecasts for the supply/demand in 2022.

Winter Storm of February 2021

In mid-February 2021, Texas suffered major power outages throughout the state spurred on by a series of winter and ice storms from Feb. 13-17. The storms caused a massive electricity generation failure across Texas which led to shortages of food, water, and heat – all told more than 4.5 million homes and businesses were left without power for days and over $20 billion in damages have been reported.

February 14th, 2021: Every county in Texas and much of Lousiana werre under a Winter Storm Warning.

What Is Triazine and Why Is It Critical for H₂S Treatment?

The formaldehyde-MEA triazine, which is a common H2S scavenger in natural gas, is synthesized by the reaction of formaldehyde and monoethanolamine (MEA). Triazine, water, and free formaldehyde or free MEA are the components of triazine and each play a critical role in the effectiveness of triazine as a stable product. It is a near commodity because of the overall general availability and mass manufacturing in the Gulf

Why the Supply Upset in late 2021?

The chemical plants that are devoted to making the raw material for triazine, namely formaldehyde and MEA for the U.S., are located predominately along the Gulf Coast and most were severely impacted by the 2021 Winter Storm. When those plants went down for maintenance under force majeure in late February, some experienced extended delays taking months to get back online. This maintenance period was by far longer than most expected. During this downtime, Producers and other end users partly relied on existing inventory of triazine and began to see tighter allocation of both raw materials. As Q1 and Q2 progressed, MEA prices continued to steadily climb due to tight supply and higher demand in oil & gas as WTI continued to climb. H2S scavenging or H2S removal is needed for safety standards but also due to flaring restrictions in natural gas. It is necessary for Producers to remove H2S before flaring to limit SO2 emissions. If a Producer reaches its flaring limit, the highly valued crude oil value cannot be extracted, and the well must be shut in. Both Texas and New Mexico, where most of U.S. production is found have strict flaring limits.

How Did the Shortage Impact Oil & Gas Producers?

As plants came back online in the late spring/early summer, the supply of MEA was still tight as manufacturers had drained coastal storage tank inventories. The storage tanks had run so low, there was concern that the tanks needed to be refilled to a certain level to ensure that when Hurricane Season was upon the Gulf Coast, there would be enough volume to physically weigh down the tanks incase high winds took direct aim.

Therefore, even though MEA was being made, the throttle was not fully opened to triazine manufacturers and a supply squeeze, albeit slightly lessened from earlier in the year, was still driving prices higher as demand increased in parallel. As WTI and Brent continue to climb, natural gas has also seen as surge in pricing. Natural gas prices that had been hovering around $2.50/MMBtu has spiked to $5.95/MMBtu on 9/28/21. Associated gas from crude oil production typically seen with little no value now warrants higher H2S treatment costs which drive triazine demand higher.

Where Do Natural Gas Prices Fit Into the Outlook for Triazine?

Near-term Henry Hub gas prices still support elevated levels of $/MMBtu which provides a bit of netback cushion to absorb the cost of treating with triazine. However, as triazine prices will fall when supply is rebalanced, the cost to treat the gas could improve the Producers’ netback price for gas.

Triazine Supply and Demand for Fall 2021

Outlook for Triazine

Hurricane Ida played an important role in the current amine shortage. The two largest producers lost about two weeks of production and declared force majeure limiting their supply to about 50% of normal output. A Mexican manufacturer is also down for maintenance leaving only one supplier running at capacity. Ethanolamine manufacturers are seeing 2-3x demand higher than production and see the shortage lasting well into 2022.

How Can Producers Avoid Triazine-Related Disruptions?

Sources

https://www.wfaa.com/article/weather/winter-weather-extreme-cold-this-week-in-north-texas/287-a4622452-11c7-4674-aa13-6707782fd226.

https://www.noaa.gov/news-
release/noaa-predicts-another-active-atlantic-hurricane-season.

https://www.eia.gov/naturalgas/weekly/#tabs-prices-2.

Q2 Technologies company data, 2001-2021, https://q2technologies.com/.

US Shale Outlook 2021: Oil Demand Recovery and Price Forecast

Reflections on global oil demand/supply for 2021

While 2020 brought a huge shock to the entire world, the oil industry was hit particularly hard. US shale requires continued investment to respond to the future global oil needs. However, as we look back on the past year and move forward with the new year, there are three important factors to consider as we reflect on the outlook for US shale. We expect a general improvement for oil, and for US shale in particular while capital discipline will make it hard to find resources for investment.

Demand Side

Demand destruction during the past year was less than most expected.

Global oil demand only decreased in the mid-teens during the COVID 19 crisis though it was thought that demand would decrease in the high 20’s. Even with reduced economic activity and widespread lock-downs during the current pandemic, global oil demand did not fall as much as it was feared. A part of this is due to the people’s avoidance of public transportation to avoid exposure. This is a particularly interesting phenomenon because it seems to point to a permanent behavioral change resulting from the pandemic. The importance of preserving energy independence if also a key geopolitical point for the US moving forward.

Global oil demand recovery has been very robust.

The lowest global oil demand in April 2020 was close to 80MMbpd and it is currently back at over 100+ MMbpd. This is a very significant increase since mid-April 2020. The demand outlook for 2021 is really strong considering a successful global vaccine rollout. That will bring along strong economic recovery and a comeback of traveling and jet fuel demand.

Supply Side

Global Oil inventories are getting lower and lower.

Global oil and liquids inventories signal the direction of prices. Currently, they are falling and are expected to continue to do so. The initial shut-ins and production curtailments resulting from pandemic reduced global oil supply. While we foresee increased demand, the natural decline in productivity rate will drive supply declines in late 2020 and through 2021. Oil supply coming from OPEC+ is expected to hold flat through 2021 at 3 MMbpd if price remains at $45/bbl.

At strip pricing, the global oil inventory drawdowns will accelerate sharply in the coming months leading to unrealistic inventories. If price remains at $45, crude oil inventories expressed as OECD days of consumption would reach only 22, which signals that prices could not be that low. Inventories are normalized around 30.

Production and price levels are likely to rise.

It is expected to see prices gradually rising during the first half of 2021 while they will rise sharply during the second half considering the inventories falling way beyond normal. OPEC will likely increase production to max capacity by the end of 2021. Additionally, it is expected that Iran will also be able to participate on the market with an additional supply of around 1Mbpd.

US shale response

The outlook for US shale is cautiously optimistic with expected improvement on the second half of 2021. Current damage to US industry will result in substantially low supply during the current year. US supply response will lag rig count changes. For the US to increase production, it is expected that oilfield activity will ramp sharply higher towards the end of 2021 and into 2022 when oil prices reach higher levels.

As production ramps up, operators must focus on controlling costs to remain competitive. Learn how to lower lease operating expenses.

If existing laws and regulations remain through 2050, projects domestic crude oil production to return to 2019 levels by 2023 and then remain near 13 million to 14 million barrels per day (b/d) through 2050. The United States continues to be an integral part of global oil markets and a significant source of supply, despite uncertainty surrounding post-pandemic expectations for oil and natural gas demand.

The US, a key crude supplier into 2050

High H2S and mercaptans levels are expected to continue appearing in the many Permian Basin wells, hence timely monitoring and treatment are paramount even during these next few months when prices are expected to remain around $45. As production levels rise, so will the need for treatment. As always, we at Q2 Technologies are here to serve you with all your treatment needs.

Texas crude oil exports remain strong, so does the regional port activity

Amid the oil prices downturn and the COVID 19 stay-at-home orders, it is very encouraging to hear good news. Almost half a year into the outbreak of the coronavirus pandemic and the unprecedented shock to oil consumption, markets are reaching a turning point. It seems that the market is on a path towards recovery as the easing of stay-at-home restrictions along with production cuts drove WTI prices to $33, a two-month high. Though producers will have to maintain supply cuts into 2021 to sustain the upward trajectory in price, these numbers show that demand has begun to recover.

An active economy will drive demand up, trickling benefits towards employment and increased oil consumption. We look forward to recovery times and continue to serve all your H2S treating needs. Contact us to discuss how we can help you meet specs and get rid of H2S. The resiliency of our community and the quick response on the side of producers will eventually allow for increased output. Just as the US has swiftly cut production, it will also be ready to bounce back. Gasoline demand has started to show signs of recovery as states begin to reopen economies and road traffic picks up.

Logistics play a very important role in the economy. Ports can be seen as a thermometer of the economy and its health. The network of ports that serves the Gulf states region is an amazing collection of valuable infrastructure that enables states like Texas to be more competitive. As a stand-alone country, Texas would be the 10^th largest economy in the world. The state’s GDP in 2019 was $1.887 trillion. We have a unique advantage, since seven Texas ports rank in the top 50 of all the US. Texas Gulf Coast ports handled more than 563 million tons of cargo in 2015, 22% of all US port tonnage.

By taking a look at the statistics published by the Greater Houston Port Bureau, we can learn about how our state’s economy is preparing for the future, but also about how our economy is behaving during this time. The organization encompasses over 220 member companies that collaborate to advance the port region for the benefit of all such as the Houston Ship Channel Expansion and the optimization of chemical tanker scheduling. Regional ports together not only support our economy, but portray how oil and gas production along with petrochemical plants shape the imports and exports through our ports. We notice a piece of good news that it is important to share here.

Figure 1.- Vessel Arrivals by Port (by Greater Houston Port Bureau)

The vessel arrivals have increased on a Year to Date basis as figure 1 shows. The increase in vessel arrivals not only shows the importance of the region as a market but the improvements in valuable infrastructure across the ports that serve it. While the global employment and economy have been hit with the impact of the COVID 19, we have had a twofold impact in our region given the oil glut and low prices. However, the improvements in port infrastructure have begun to show increased vessel traffic and we can appreciate significant increases in Brownsville, Corpus Christi and Freeport. Similarly, the port of Houston, which handles the largest amount of vessels, also increased the number of vessel arrivals. Overall, there is a 3.6% increase YTD for the greater Houston ports mirroring the busy dynamic of the region.

Though at the global level the United Nations Conference on Trade and Development (UNCTAD) points that 2019 showed a weak trade growth given trade tensions and protectionism, Texas has performed well. This might be related to the global supply chain restructuring towards regionalized trade flows. UNCTAD expected international maritime trade to expand at an average annual growth rate of 3.5 per cent over the 2019–2024 period, driven in particular by growth in containerized, dry bulk and gas cargoes before pandemic considerations. The fact that Texas grand total vessel arrivals growth amount to 3.6% YTD after being hit with COVID is encouraging.

Figure 2: Texas Crude Oil Exports

Shifting our attention to crude oil, we also find a positive note. Figure 2 shows the percentage increase of exports through time. Even during the start of the pandemic and accompanying lock-down, we can see that the exports have increased slightly. Since most producers have hedge protection, their operations have continued and exports remain strong as shown in the graph. This indicator is one of the leading indicators of Texas as a main crude oil supplier even during times of uncertainty and low prices.

There are more positive news in the industry. The Trump administration has granted royalty relief to several drilling companies producing oil and gas on federal lands in recent weeks, according to a government database, as the industry seeks help weathering low energy prices. In addition, ports continue to develop infrastructure to support local industry and increase competitiveness. Learn how the Port of Corpus Christi is expanding infrastructureto support oil exports. The Port of Corpus Christi will have 17 million barrels of additional oil storage by August as record low commodity prices have producers desperate to find a place to store their crude until prices rise.

The current cycle will pass and the resiliency that characterizes our industry and our people will create new approaches and technologies. Already the Permian Basin appears more resilient. Simultaneously, natural gas seems better positioned to navigate the coronavirus. The pandemic will create new opportunities in the midstream sector, particularly in natural gas-focused infrastructure. We continue to conduct research and develop the best products to serve you in your H2S treating needs. We offer our Pro line for H2S and mercaptan removal from crude oil and liquids as well as from natural gas. Reach out to us to discuss how we can help you get more for your assets.

Lower Lease Operating Expenses with Pro3^® H2S Control

Q2 Technologies® is committed to bringing to market the best alternatives to control H2S. We are in touch with our community and just met with several operators in the Permian Basin. The message is very straight forward: Lower your Lease Operating Expense is of paramount importance always, and more so in current times.

By using Pro3®, a pipeline approved H2S removal process, this operator will now meet crude pipeline spec for H2S. This will save them $3-5/bbl in trucking while avoiding costly road maintenance. You can do it too, contact us now.

Watch the system at work!

Calibration Cilinders. Watch the system at work!

Our smart injection system will monitor and optimize inception rates via an app, while remotely measuring tank levels. This way, you increase your efficiency while lowering your operating expenses.

Call us today to lower your lease operating expenses today. We are here to serve our community by doing what we do best: Control H2S.

Emergency Mercaptan & H2S Treatment for Crude Oil at Port

We at Q2 Technologies® know how hectic it can be when a crude shipment is found to be out of specs. This calls for adequate treatment and time is of essence, given that the expense of loading crude into a ship will be delayed until the cargo meets the requirements. Regardless of the time of day or the day of the week, vessels are always on the move and ports charge for the time a ship is using a berth.

Emergency Call for Mercaptan Treatment

On Saturday morning at 10:00 am we got a call from a customer. The customer requested 7 truckloads of Pro3® to be delivered during Saturday and Sunday. 750,000 barrels of crude oil were to be loaded to an Aframax vessel at a Gulf terminal. The oil had higher levels of mercaptans than anticipated. We were able to coordinate our manufacturing and logistics teams to ensure timely manufacture and delivery of our non-amine/non-glyoxal mercaptans scavenger for crude oil applications Pro3®. Our dedicated fleet of trucks allowed us to respond quickly and finish the project in 36 hours.

Oil tanker at port, it is very important to minimize the loading time of the vessel.

Direct Injection and Successful Project Completion

Our first two Pro3® deliveries were one on Saturday and the remaining 5 on Sunday. Upon delivery, Pro3® was directly injected into a shore tank and allowed to mix. In about 36 hours from first notice, the project was successfully completed as the ship started being loaded late on Sunday night. At Q2 Technologies, we help our clients remove mercaptans and get more for their barrel. Our 24/7 response capacity allows for on demand treatments while avoiding costly demurrage’s. Pro3® is used to treat crude to remove mercaptans and H2S while maintaining the crude oil’s quality.

Understanding Mercaptans and Crude Oil Quality

Mercaptans occur naturally in sour crude and its concentration varies as it commingles with crudes from different sources. When a ship comes to port, the crude owner needs to certify that the oil being delivered meets the specs defined in the sale agreement. The presence of H2S and/or mercaptans often lowers the value of the crude and shipments may be rejected if the sales specification on the crude oil sale contract is no met. Contact us today to find out how we can help you too.

The Permian is fully de-bottlenecked now, what does this mean for you?

The Permian faced pipeline shortages a few months ago. This all changed as millions of barrels of takeaway capacity came online. Producers had been unable to transport oil from the region and crude oil produced in the Permian was heavily discounted getting $10 less per barrel compared to oil price in Houston or Corpus Christi only a year ago. Drilled but uncompleted wells can quickly go online and boost producer and midstream revenues.

Sizing the gap between production and takeaway capacity

Permian Basin producers currently pump 4.72 million barrels a day while pipeline takeaway capacity is 6 million barrels a day and growing. The Permian is fully de-bottlenecked now. It is expected that oil production in the Permian Basin will increase around 1 million barrels yearly, to reach 8 million barrels a day in 2023.

The gap between daily oil production and pipeline capacity out of the Permian Basin has diminished the price difference of crude in WTI Midland and WTI Houston. The spread between Midland and Houston has gone from $10 a year ago to around $2.50. Some companies turned to railcars for transport paying between $6 and $8 our barrel but that will not be necessary anymore.

A timely improvement to better serve export opportunities

Producers benefit from the improved pipeline capacity encouraging production, just in time for the expected increase in exports to China. After a more than a year-long tariff war, China committed to add at least $52.4 billion in energy purchases over two years, up from $9.1 billion in 2017. However, tariffs remain on many products, including a 25% tariff on LNG. We remain hopeful that these will also be removed soon.

The additional oil produced in the United States will be exported. Light crude, such as the one being produced in the Permian, has a better quality than what local refineries need, given that they were built for cheap heavy oil. Hence, only a third or Permian oil currently being produced is sold nationally and the rest is sent overseas. We consider that the region is now well prepared to increase sales to China and other countries.

The Midstream actors and the scope of the new pipelines

Midstream companies have been adding capacity pushed by the booming production and increased interest in exporting US crude. The port of Corpus Christi alone exported 1.07mn b/d of crude oil in October surpassing Houston based exports. The Cactus 2 and the Epic line began service last August moving Permian crude to the Corpus Christi area with capacities of 670,00 b/d and 400,000 b/d respectively. The Epic line will soon add 600,000 b/d.

Source: RBN Energy

Similarly, Gray Oak started service in the fourth quarter of 2020 and will be 900,000 b/d by the end of the Q1 of 2020. The Sunrise pipeline extension added 120,000 b/d while the Seminole-Red added 200,000 b/d of takeaway capacity in 2019.

In the region, the Red Wolf Crude Connector with 120,000 b/d and the Gray Wolf Crude Connector with 120,000 b/d are in construction while it has been announced that the Jupiter pipeline with 1,000,000 b/d, the Voyager pipeline with 250,000 b/d, the Midland-to-Echo 3 pipeline system with 450,000 b/d and the Red River Pipeline with 85,000 will begin construction in 2020. Additionally, the Permian region will increase takeaway capacity with the Red Oak Pipeline wit 400,000 b/d, the Wink to Webster pipeline with 1,000,000 b/d, the Seahorse pipeline with 800,000 b/d which will start construction in 2021. These projects are planned to move crude oil throughout Texas and Louisiana to further alleviate regional constraints.

For Midstream companies, it will be very important to secure markets with producers now that the takeaway capacity is larger than current production. Spot rates will be comparatively low and times will be difficult for shale shippers while pipeline takeaway capacity is oversupplied. Pipeline operators will need to choose between lowering tariffs and sacrificing volumes during the incoming months, particularly when trying to renew long-term shipper contracts about to expire. Companies with well established infrastructure will have an advantage during these highly competitive times of strained profit margins. Still, some companies are forging ahead with pipeline expansions because of industry support.

What does it mean for you?

Market dynamics shifting in the Permian Basin

Completion of long-expected pipelines.
Entry of major players: Chevron, Exxon, Occidental Petroleum, and BP.

ExxonMobil’s rapid growth

Permian output jumped 90% year-over-year, averaging 274,000 boe/d in 2Q2019.
Plans to increase output to 1 million boe/d by 2024.

Pipeline developments

Exxon joined Lotus and Plains All American to construct the Wink to Webster pipeline.
Multiple projects may lead to future competition for pipeline space.

Market impact of majors

Companies pursue large integrated projects that are less price sensitive.
The shale industry has shifted to a scale game, favoring big players.

Impact on oilfield services

The trend toward consolidation will pressure oilfield service companies.

Independent producers are relatively inexperienced with the complexities of exporting and new intermediaries might step into the market or acquisitions might continue. Smaller producers will need to cope these pressures applying strong capital discipline. US refineries are already buying all the light crude they can use from domestic suppliers. Most of the additional 4 million barrels per day of crude coming out of the Permian Basin over the next few years will have to be exported.

Employment continues to be high in the region, there is a shortage of skilled workforce for construction and operations. About 171,000 well paid jobs are supported by pipelines in Texas. The local economy benefits from pipelines. From 2014 to 2024, pipelines will contribute with about $2 billion in new state and local tax revenue literally keeping the economy pumping. It is estimated that pipelines in Texas will contribute $374 billion in total economic output between 2014 and 2024.

Regardless of where you are in the industry, if H2S is present in your volume, it is likely creating a value gap. Q2 Technologies’ Pro3®, Pro3® Nano, and ProM®, for crude, gas, and mercaptans, respectively, can chemically alter the H2S or mercaptans out of the equation for you. Contact us today to increase value wherever you are in the lifecycle of that hydrocarbon.

New Year, a review of challenges and opportunities.

As we begin 2020, we at Q2 Technologies® want to wish you the best while also helping you meet your goals, get more for your barrel and making sure we continue to offer the best in H2S removal. Whether it is logistic savings, safer working conditions, or environmentally sound products, we are here for you.

What Are the Key Oil Industry Challenges in 2020?

While no two years are ever alike, we found that 2019 brought some unexpected challenges which will continue to push oil producers to be creative and responsive. We know that 2020 will also require flexibility and quick actions from actors in the oil and gas industry.

Why Is the US-China Trade War Impacting the Oil Industry?

There are two old challenges that the oil industry will continue to face during 2020: One challenge is the on-going trade war between the United States and China where oil exports from the US pay a 5% tariff since last September. More than 30 states stretching from Florida to Alaska suffered double-digit drops in merchandise exports to China through September of this year.There are two old challenges that the oil industry will continue to face during 2020: One challenge is the on-going trade war between the United States and China where oil exports from the US pay a 5% tariff since last September. More than 30 states stretching from Florida to Alaska suffered double-digit drops in merchandise exports to China through September of this year. Learn more about why Chinese tariffs on US oil are a concern. Sales to the Asian nation fell 39% in Texas, where oil and gas products comprise the largest export to that country. Sales to the Asian nation fell 39% in Texas, where oil and gas products comprise the largest export to that country.

Furthermore, future growth and investment perspectives for 2020 can be lower because of said trade war. However, the first phase of a trade deal between the United States and China is expected to be signed on January 15^th. The additional tariffs on Chinese goods that were to take effect December 15^th did not take effect and it is expected that tariffs will be reduced while China would make substantial additional purchases of US goods and services in the coming years. President Trump suggested that energy products would be among them. US Trade Representative Robert Lighthizer said China has pledged to increase imports from the US by more than $200 billion over the next two years.

For US oil producers, it continues to be important to track how the trade war evolves and to maintain a competitive position. It is necessary to preserve the markets that have been developed as we have become exporters. Q2 Technologies® helps in this effort with injection services at terminals, pipelines, storage tanks and during loading and off-loading of vessels to eliminate H2S and bring the oil to specs.

Oil & Gas are the top export from Texas to China

How Are Geopolitical Risks Affecting Oil Markets?

The other old challenge is the unrest and uncertainty in the Middle East region considering the attacks on Saudi Arabia during 2019. 2020 has begun with a very complex situation given the tensions between the United States and Iran. Tankers are at risk and oil coming from other regions might have a larger demand. Oil producers might continue to find rising shipping costs while oil price will be fluctuating amid uncertainty. Increased shipping costs hurt domestic producers. We can help you with our Pro3® so that you can get more for your barrel by removing H2S efficiently.

Political upheaval in the Middle East and elsewhere does not impact oil supply security in the same way as before thanks to the growing US production. US shale growth and exports are influenced by world demand and the varying conditions faced by suppliers. Learn more about how US shale production is expected to recover and influence global oil markets in 2021 in our US Shale Outlook. For example, oil prices would skyrocket and climb above $100 per barrel if Iran moved to completely cut off the Strait of Hormuz, energy analysts told CNBC on Wednesday.

Hormuz Strait

Elevated geopolitical tensions have sparked fears of a widening conflict in the Middle East, with energy market participants increasingly concerned that the fallout could soon disrupt regional crude supplies. We expect that the global oil supply security will be maintained even in the face of serious security risk in those regions and that if prices jump, they will stabilize quickly. Therefore, we emphasize the importance of planning for a continued demand at relatively stable prices for American oil.

What Role Does the US Election Play in Oil Industry Challenges?

The US election cycle plays a role in the economy and particularly, in the energy industry. Lower oil prices have been a part of the economic pitch to voters for president Trump. It has been noticed that Saudi Arabia’s push for a production cut this month might be related to an understanding of reducing output as more optically challenging in a US election year.

Some candidates have criticized the industry and its operations, including fracking and pipelines. A few are courting votes by promising to shut down core elements of the industry’s infrastructure. Companies need to navigate this climate of political uncertainty.

For oil producers, the push for lower oil prices during electoral times brings the always important need of getting more for your barrels to the forefront. Q2 Technologies specializes in helping to upgrade barrels, provide safety and protect assets. Our chemistry can help you get more and move your barrels to optimal market. Contact us today to discuss how we can help you.

How Is Climate Change Shaping the Future of the Oil Industry?

While oil and gas continue to be of paramount importance for the world economy and the current civilization, there is an increased awareness of the need to get serious about climate change. The largest European producers are being pushed to try to find cleaner business lines and transition to new energy technologies.

Fossil fuel demand is widely expected to peak around the midcentury, but there is not a clear consensus about when. Some forecasts project combined oil, gas, and coal consumption to plateau by 2030, whereas others do not see a peak until after 2050.

The energy transition is a long-term trend, but we have seen a greater focus on this in 2019, which we expect to gain momentum in 2020. Decisions made now can help companies to better position themselves for the decades ahead, to thrive by anticipating disruptive change rather than reacting to it too late.

Energy Transition

How Can Q2 Technologies Help You Overcome These Challenges?

During 2020 and for the decade that we are starting, it will be important to invest in research and development and to bring to market cleaner technologies within oil and gas, including CO2 sequestration and water recycling in fracking operations. We at Q2 Technologies® pursue the advancement of scavenging technologies bringing to market the best alternatives for H2S removal.