(InsideClimate News – November 6, 2013) Need for Keystone XL Erodes as U.S. Oil Floods Gulf Coast Refining Hub (By Elizabeth Douglass)
Many benefits being touted by Keystone supporters are being delivered by the domestic oil rush. 'It's become a political football more than anything.'
Some market watchers see the current excess as a temporary imbalance, and are not convinced that the Gulf glut and the widespread oil discounts will last. Once refineries get back to full production, the extra oil could quickly disappear, they note. Others question the staying power of the surge in new domestic oil production, which relies on fracking, a drilling process that draws crude out of tight geologic formations in a manner that appears to deplete the oil deposits more quickly than traditional wells that tap into underground pools of crude.
For now, at least, those doubts are not being borne out. The reversed Longhorn Pipeline, for instance, now ferrying crude from West Texas to Houston, just increased its capacity to 225,000 barrels per day.
Since the beginning of 2012, about 1.4 million barrels per day of pipeline capacity has been added to usher crude into the Texas Gulf refining center, and that number grows to nearly 2 million barrels per day once you add in rail and over-the-water oil deliveries, according to Sandy Fielden, director of energy analytics at RBN Energy LLC, an industry consulting firm.
And more—much more—is on the way.
When the Keystone XL’s southern leg opens, it will carry 700,000 barrels per day from Cushing to the Texas coast, effectively eliminating the remaining backlog in Cushing. Add in new pipeline capacity from the Texas Permian Basin, new railway facilities and moves to increase transportation via barge and tanker, and the Gulf can expect more than 2 million barrels per day of new inbound oil capacity, Fielden said this week in an article for RBN.
All told, between 2012 and 2015, more than 4 million barrels of oil transportation capacity will have been added—all of it aimed at Texas refineries. Those refineries have a combined processing capacity of 3.7 million barrels per day, he noted.
"With growing U.S. and Canadian crude production showing no sign of easing up, sooner or later, these kinds of crude volumes will be making their way into the Texas Gulf Coast region. And when they do, there will be more crude than refineries can handle," Fielden said. That raises the question: What is going to happen to the excess supplies?
