C5

Since we began this series on diluent supplies to Canada (used to blend with heavy oil to facilitate pipeline shipment), questions about diluent supply have been overshadowed by the bigger concern with falling crude prices. Right now, oil sands producers are probably more concerned with understanding the economics of their expansion projects and whether to go ahead with new oil sands development programs than with securing diluent supplies. Nevertheless, falling diluent costs in Edmonton have provided some relief to existing producers. Today we look at how improving diluent supplies and better prices for Canadian crudes have reduced diluent costs.

Supplies from the three main branches of the US condensate family are increasing faster than demand can keep up. Field condensate production from shale basins is nearing 1 MMb/d - headed to 1.6 MMb/d by 2018. Plant condensate – aka natural gasoline - will increase from just over 0.3 MMb/d in 2013 to more than 0.5 MMb/d in 2018. Because field condensates cannot be exported to overseas markets, more of this material will be refined traditionally or using a splitter – pushing out existing refinery demand for natural gasoline and creating an excess of naphtha range material. Petrochemical demand for natural gasoline has dried up in the face of cheap ethane feedstocks. Canadian demand for natural gasoline as diluent will soak up some but not the entire natural gasoline surplus. With US gasoline demand declining, the only outlet for excess naphtha and natural gasoline will be more exports (beyond Canada). Today we look at changing condensate demand patterns.

By Al Troner, President Asia Pacific Energy Consulting (APEC)

U.S. production of field (lease) condensates is growing like crazy, especially in the Eagle Ford.  There is way too much of this material for it to be absorbed into traditional crude blending markets.  At the same time the production of plant condensate, a.k.a. natural gasoline, is also increasing along with the yield of all other products from natural gas processing plants.  A glut of condensates has developed and is getting worse. Clearly this is an opportunity for new market development, and the bizdev community is hard at work coming up with concepts, projects and proposals to use all of this material in the U.S. and in export markets.  But there is a problem. Condensate markets in different geographies seem to have little in common with each other.  It’s like walking through the looking glass.  One term can have several meanings.  One meaning can be ascribed to several terms. Today we launch a RBN blog series to make sense of it all.