Refineries along the U.S. Gulf Coast (USGC), which account for half of the country’s total refining capacity, are generally among the most sophisticated and complex anywhere, with configurations that enable them to break down heavy, sour crude oil into high-value, low-sulfur refined products. However, over the past eight years, the USGC has been flooded with increasing volumes of light, sweet crudes produced in the Eagle Ford, the Permian and other U.S. shale plays as new pipelines were constructed or reversed to the coast for domestic refining or export. Still more pipelines will be coming online over the next year. Today, we evaluate how much domestic crude oil has been absorbed into the USGC refining system, the implications to the overall crude slate qualities, and options for increasing domestic crude oil processing in the near term.
Canadian crude output is rising, requiring new export routes. As traditional pathways face constraints, the U.S. Rockies—especially the Guernsey, WY hub—are emerging as key corridors for moving Canadian heavy crude to downstream markets, including the Gulf Coast.
In September 2018, the Energy Information Administration (EIA) reported that the U.S. (black line in Figure 1) surpassed Russia (red line) to become the world’s largest producer of crude oil; Saudi Arabia (orange line) is now in third place. Shale production, particularly from the Permian Basin, is leading the charge, and transporting this light, sweet crude oil from West Texas to the Gulf Coast has created a flurry of logistics projects for midstream companies. The hefty spread between West Texas Intermediate (WTI) and Brent (about $9/bbl at the time of writing) illustrates that the pipelines pointed towards the USGC, home of over half of the U.S. refining capacity and export terminals, have been filled. However, the new transport infrastructure being planned and built to relieve that constraint will eventually open the floodgates to the coast again, providing options for coastal refineries to increase domestic input or for the crude oil to be exported.
Join Backstage Pass to Read Full Article
About the song
“Darkness into Light” is a track on reggae singer Matisyahu’s third studio album, Light, which was released in 2009. Matisyahu, which is Hebrew for “gift of God,” is the stage name of Matthew Paul Miller, a Jewish-American reggae singer, rapper and beatboxer. Miller also performed for more than a year under the name MC Truth. Matisyahu to date has released six studio albums and four live albums, including two recorded at Stubb’s Bar-B-Q in Austin, TX.
Comments
This scenario is assuming refiners maintain the current mix of light in their crude slates with incremental production needing to hit the export market. Is there a plausible scenario where USGC refiners actually reduce their input of light, and take more WCS for example, sending even more barrels into the export market?