U.S. refineries are, of course, far less dependent on crude oil from the Middle East than they were before the Shale Revolution. But the cutoff in oil supplies from the Persian Gulf is forcing several U.S. refiners to look elsewhere for the mostly medium-sour crude they had been sourcing from the region.
Over the past few years, rising production in the Canadian oil sands and U.S. shale plays such as the Bakken, Permian and Eagle Ford has given refiners new options for sourcing their crude, causing changes in oil pipeline utilization and prompting the development of new pipelines — or the reversal of existing pipes. A prime example of all this is playing out in Memphis, TN, where a Valero Energy refinery will be shifting from mostly U.S. Gulf Coast-sourced light crude to light crude that will flow in on the new Diamond Pipeline from the Cushing, OK, crude storage hub. Valero’s change in crude sourcing will be yet another blow to the 1.2-MMb/d Capline Pipeline, which for decades has moved crude north from the Gulf Coast to Patoka, IL, and other points along the way, including western Tennessee. Today, we look at the thinking and economics behind Valero’s plan and at the latest news on Capline.
