Topics in Module 3 Include:
Module 3.1 — Crude Fundamentals: Market Overview, Export Drivers and Constraints
Presenter: T.J. Braziel
Whether you want to focus on crude oil, natural gas, or NGLs, to understand how U.S. energy markets behave, it is imperative to understand the fundamentals of the crude oil market. To do this you need to understand what’s happening with production, imports, exports, refinery demand, storage, pricing, and how they all interact with each other. This section covers the fundamentals of the energy industry’s most popular commodity, crude oil, so you can build a better understanding of how it drives the decisions making process for all other energy commodities.
Module 3.2 — Crude Oil Pricing Mechanics and Domestic Trends
Presenter: Martin King
The price of Domestic Sweet (DSW) crude oil at Cushing, OK, represents a lot more than just a price. It’s a barometer of not only what was going on with the world economy at the time, but what’s going to happen in the future. After all, it is the price of the prompt-month futures contract. If you are trading, you’ve got to have a really solid understanding of what the number is — and more importantly, what it is not. Notably, DSW is not synonymous with West Texas Intermediate (WTI), which typically sells at a premium to the NYMEX benchmark. Not a lot of people know how these mechanics really work. This module addresses those issues, along with other pricing mechanisms that are used for physical crude oil transactions in North America and how to make sense of what those prices can tell us about the broader supply/demand picture in oil markets.
Module 3.3 — Crude Quality: Prices, Pipelines and Refining
Presenter: Taylor Noland
All crude oils are not created equally. Some are light (high API gravity) and some are heavy (low API gravity). Some are sweet (low sulfur content) and others are sour (high sulfur content). But that does not begin to scratch the surface of all the factors that refiners must consider regarding crude quality. Critically important is the potential mix of end products that various crude grades may yield. This module explains those crude characteristics and describes the regional differences in the qualities of crudes produced and refined. We’ll also look at the U.S. surplus of light oil that can attain a higher value in export markets and strong U.S. demand for medium and heavy grades, especially from Canada.
Module 3.4 — Pipeline Projects, Exports
Presenter: Taylor Noland
With U.S. crude production continuing its post-pandemic rebound and refinery demand expected to be steady for a while, combined with U.S. production focused on lighter shale crudes, that means only one thing: essentially all of the incremental production growth, which is largely coming from the Permian, will flow to export markets. Exports have gone from 0.5 MMb/d in 2015 to nearly 4 MMb/d so far in 2024. Corpus Christi has experienced the largest growth during this time period, but those dynamics may be changing as the pipelines that serve that area are nearly maxed out and as four potential offshore oil terminals are vying to compete to be the first terminal to join Louisiana's Offshore Oil Terminal (LOOP) to be able to fully load a Very Large Crude Carrier (VLCC).
Module 3.5 — Legacy CO2, EOR, Pore Space
Presenter: Rusty Braziel
One way to reduce greenhouse gas emissions is to avoid producing them in the first place, but for many industrial processes it’s too expensive to eliminate the production of carbon dioxide (CO2). Once captured, the most straightforward way to get rid of CO2 is carbon capture and sequestration (CCS), where it’s pumped deep underground for permanent storage. But the CO2 can also be used for other things before storage, called carbon capture use and sequestration (CCUS). That’s where this module will put its focus, with a look at enhanced oil recovery (EOR), a process in which CO2 is used to stimulate a reservoir to recover more oil after secondary recovery has played out.
Module 3.6 — CCS Regulation, 45Q
Presenter: Jason Lindquist
An economic incentive — the 45Q tax credit — is designed to promote major investments in carbon capture across the energy landscape. As discussed in Module 3.5, there have always been markets for CO2, but 45Q allows you to permanently store that gas underground and collect the tax credits. It’s a potentially huge amount of money — hundreds of millions of dollars — which is why it has everyone’s attention, but successes have also been limited to date. We’ll look at how the tax credit was designed, changes that were made in 2018, and how it was significantly enhanced by 2022’s Inflation Reduction Act.
Module 3.7 — CO2 Infrastructure Projects
Presenter: Noel Copeland
This module provides an update on carbon capture and sequestration (CCS) projects. Four CO2 transportation projects have been announced since 2021 — all four of which are targeting capturing emissions from ethanol plants in the Midwest. There are also two large-scale CCS hub projects on the Texas Gulf Coast: the Houston CCS Innovation Zone and Bayou Bend CCS. The final CCS project that the module discusses is Oxy Low Carbon Venture’s Stratos DAC project in the Permian.
