Daily Energy Blog

Much tougher rules governing emissions from ships plying international waters soon will force wrenching change on the energy industry. Demand for high-sulfur fuel oil is expected to plummet; ditto for HSFO prices. Demand for low-sulfur distillates from the shipping industry will rise sharply, putting upward pressure on prices for marine gas oil, marine diesel oil and ultra-low-sulfur diesel. These demand and pricing shifts, in turn, will have a number of significant effects on refiners. Today we continue our series on the far-reaching effects of the International Maritime Organization’s (IMO) mandate to slash emissions from tens of thousands of ships starting in January 2020.

A new international rule slashing allowable sulfur content in the marine fuel or “bunker” market will have profound effects on global demand for high sulfur fuel oil and low-sulfur middle distillates—and with that, major impacts on the price of those products, the demand for various types of crude, and the need for refinery upgrades. What we have in the making here is a refining-sector shake-up that will extend well into the 2020s. Today we begin a series on the rippling effects of the International Maritime Organization’s (IMO) mandate that, starting in January 2020, all vessels involved in international trade use marine fuel with sulfur content of 0.5% or less.

The Shale Revolution has caused big changes in U.S. crude oil production, in domestic flows of crude via pipelines, ships and rail tankcars, and in crude import volumes. Flow changes in particular have negatively affected the Strategic Petroleum Reserve’s ability to accomplish its two primary goals: protecting U.S. refineries from the worst effects of a major crude oil supply interruption, and—when called upon by the International Energy Agency—quickly injecting large volumes of crude into global markets. A fix now in the works would add Gulf Coast marine terminals dedicated specifically to moving SPR-stockpiled crude to those who need it, both within the U.S. and overseas. Today we conclude a two-part blog series on challenges and coming changes at the SPR.

As U.S. crude production ramps back up and larger volumes flow to the Gulf Coast, competition is building among midstream companies for control over the final miles from pipeline to refinery or marine dock. Nowhere is this more evident than the Houston area, where more than a dozen pipelines can deliver as much as 4 million barrels/day to the region’s 10 refineries as well as to export docks. Owners of the long-distance incoming pipelines—seeking to secure terminal, storage and dock fees—are making significant midstream investment in Houston, but smaller players are also developing assets. Today we begin a two-part series describing the build-out and how competitive the market has become.

A major component of the formula used to set the price of Maya—Mexico’s flagship heavy crude, and a key staple in the diet of many U.S. Gulf Coast refiners—was changed earlier this month, raising new questions about this important price benchmark for nearly all heavy sour crude oil traded along the U.S. Gulf, and points beyond. The change came as Maya production volumes continue to fall, and as Maya is facing increasing competition from Western Canadian Select (diluted bitumen) from Western Canada. Today we conclude a two-part series on Maya crude oil, the new price formula and its potential effects.

Plains All American Pipeline announced on Tuesday that it has agreed to acquire Alpha Crude Connector (ACC), an extensive, FERC-regulated crude oil gathering system in the Permian’s super-hot Delaware Basin, for $1.215 billion. At first glance that might seem to be a lofty price, but the development of the ACC system appears to be a classic case of right-place/right-time because it addresses a fast-growing need for pipeline capacity across an under-served area. And, with its multiple connections, ACC is an attractive source of crude to fill currently underutilized downstream pipelines headed to Midland, the Gulf Coast to Cushing. Today we review Plains’ newly announced agreement to acquire the ACC pipeline system in southeastern New Mexico and West Texas.

The capacity of a pipeline built to transport crude oil or refined products is often thought to be tied only to the pipe’s diameter and pumps, as well as the viscosity of the hydrocarbon flowing through it. Increasingly, though, midstream companies are injecting flow improvers—special, long-chain polymers known as “drag reducing agents” —into their pipelines to reduce turbulence, thereby increasing the pipes’ capacity, trimming pumping costs or a combination of the two. The role of these agents has evolved to the point that they aren’t simply being considered to boost existing pipelines, their planned use is being factored into the design of new pipes from the start. Today we begin a series on DRAs and their still-growing influence on the midstream sector.