Daily Energy Blog

Western Canadian producers regularly have to swallow large price discounts for heavy crude versus the US benchmark West Texas Intermediate (WTI). During the first week of November price discounts for heavy Western Canadian Select crude versus WTI came close to $42/Bbl – the deepest since 2007. Since then they have narrowed but are still over $30/Bbl. Today we examine the relationship between storage volumes in Alberta and crude price discounts.

When over 4 MMb/d of new crude transportation capacity opens up to the Texas Gulf Coast by the end of 2015 shippers are likely to face congestion getting their supplies to refiners in the region. Given the U.S. Department of Commerce ban on exports, some of that crude needs to find a home elsewhere. Pipeline options to get crude supplies to Eastern Gulf refineries are limited to the Ho-Ho reversal project. Today we examine shipper alternatives.

Increasing production of naphtha range material such as condensates and natural gasoline in the southeastern Ohio section of the Utica shale will soon exceed the capacity of local refineries to process such light hydrocarbons. Midstream logistics companies like MPLX are developing infrastructure to transport condensate, natural gasoline and the more limited supplies of crude produced in the Utica to refineries further afield. There is also demand for condensate and natural gasoline to be used as diluent to reduce the viscosity of Western Canadian heavy crude bitumen. Today we describe MPLX and its sponsor Marathon Petroleum Corporation’s (MPC) recently announced long term takeaway transportation plans.

Crude oil and diluent pipelines running through the two largest Canadian marketing and transportation hubs at Hardisty and Edmonton in Alberta have current capacity of 3.9 MMb/d. That will double to 8 MMb/d by 2018 if currently planned projects are completed. Getting the resultant expanding flows of crude and diluent in and out of Alberta via these hubs poses the same challenge that Gulf Coast operators are facing from the flood of crude descending on them from the US and Canada. Today we begin a new series detailing midstream Canadian terminal operations at Hardisty and Edmonton.

Owning a refinery in the middle of the fastest growing shale crude basin sounds like a good idea. Calumet Specialty Products LP thinks so – they purchased the 14.5 Mb/d San Antonio refinery in December 2012 located at the heart of the Eagle Ford. Since then Calumet has set about expanding production and organizing more efficient crude transportation. But owning such a small refinery near the largest refining region in the world has its risks. Today we describe how location and crude supply advantages help keep this refinery competitive.

The potential for the Tuscaloosa Marine Shale (TMS) tight-oil play to become the next big thing in U.S. oil production is attracting exploration and production companies willing to put some money at risk in the hope of big payoffs. The TMS seems to have a lot going for it. The play in central Louisiana and southwestern Mississippi is said to have seven billion barrels of oil in place deep below ground but only a stone’s throw from the pipeline networks, terminals and refineries of the Gulf Coast. But succeeding in TMS requires overcoming the play’s challenging characteristics through nuanced drilling techniques and completion formulas. Today in the second part of our series on TMS we examine what the E&P pioneers have accomplished so far in drilling and production, what they’re learning from their experience, and what it would take to turn TMS’s potential into reality.