Prior to 2012 the only U.S. produced crude delivered by pipeline to Houston area refineries came from offshore Gulf of Mexico or onshore Louisiana fields. The majority of supplies were imports delivered by waterborne tanker. But in just three short years between 2012 and 2015, roughly 2 MMb/d of crude pipeline capacity was built or repurposed to deliver surging light shale crude production and heavy crude from Canada into the Houston area. Refiners have adapted quickly to take advantage of new sources of supply. But with much of the newly minted infrastructure underutilized, midstream companies still need to improve pipeline connectivity and storage accessibility to overcome area logistical challenges. Today we review RBN’s latest Drill Down report on Houston crude infrastructure – released today -- and announce RBN’s new infrastructure database and mapping system, called MIDI.
This Wednesday (September 30, 2015) PBF Energy announced their acquisition of the 155 Mb/d ExxonMobil Torrance, CA refinery that has been out of commission since February 2015 and will not likely return to service until February 2016. This PBF purchase is their second refinery buy this year and their fifth since 2010. The sophisticated Torrance refinery has a lot of upside potential for PBF but may be constrained by California transport fuel regulations. Today we take a closer look at the deal.
According to the Energy Information Administration (EIA), liquids production from the Utica shale in Ohio (identified as crude oil but more likely all lease condensate) has more than trebled since January 2014 from 19 Mb/d to a projected 64 Mb/d in May 2015. Regional production of plant condensate from natural gas processing has also increased with the build out of gas processing capacity in the Utica and nearby Marcellus plays and could reach 50 Mb/d by the end of 2015. Midstream companies have been busy developing infrastructure to get this condensate to market. Today we look at developing infrastructure and markets for Utica condensate.
They say that being in the right place at the right time has a lot to do with success in business. Two companies with infrastructure in the Eagle Ford can certainly attest to that. Koch Industries and NuStar Energy both owned pipeline assets supplying crude to refineries in South Texas long before the shale boom – putting them in a strong position to benefit from the flood of crude on their doorstep. Since 2011 both companies have expanded pipeline and terminal infrastructure to ship nearly 600 Mb/d of crude and condensate between them. Today we explain how.
In mid-September 2014 the joint venture partners in the shuttered St. Croix (U.S. Virgin Islands) HOVENSA refinery announced an agreement in principal to sell to a private equity fund. The refinery – shut since January 2012 - has been for sale since then but after losing $1.3 Billion in its last 3 years of operation has had trouble finding a buyer. Today we look at the hurdles a new owner has to overcome.
Two weeks ago (August 21, 2014) Plains All American announced their proposed “Diamond” crude pipeline project from Cushing, OK to Memphis, TN that will feed the Valero Memphis refinery starting in late 2016. The new pipeline will provide more direct access from Cushing to supplies of the light sweet crude this refinery processes that are being produced these days in the Williston, Denver Julesburg, Permian and Anadarko basins. Presumably the Diamond pipeline will replace existing arrangements where crude is shipped up the Capline pipeline to Memphis. That development looks to be another nail in the coffin for the northbound Capline crude trunk route between St James and Patoka, IL. Today we discuss the proposal and its consequences for Capline.
Vacuum gas oil or VGO is one of those mystery products talked about by refiners but barely understood by those of us that are not engineers. However it is an important intermediate feedstock that can increase the output of valuable diesel and gasoline from refineries. Lighter shale crudes such as Eagle Ford can produce VGO material direct from primary distillation. Today we shed some light on this semi-finished refinery product.
During the days when Gulf Coast refineries were dependent on crude imports for the majority of their feedstocks, tankers delivered crude from overseas markets. Those same tankers also played an important role in preventing refinery supply disruptions because they acted as a floating storage component in the supply chain. With waterborne imports to the Gulf Coast declining as domestic and Canadian production is increasingly delivered by pipeline, the buffer provided by floating storage will be much reduced. Today we continue our series looking at Gulf Coast crude storage needs in the shale era.
Reformate is a blending component that makes up about 30 percent of US gasoline supplies. It is also an important source of aromatics used as feedstocks for the petrochemicals industry. Ongoing changes in the US crude oil slate are reducing the volume of heavy naphtha available to feed catalytic reformer units that make reformate. At the same time better economics for lighter ethane feedstock are reducing the volume of aromatics produced as byproducts of olefin cracking. The result is a shortage of the aromatic materials used to produce a number of petrochemical intermediates such as polymers and fibers. But more changes are coming to the reformate market due to reductions in the use of reformate in gasoline. Today we look at the changing role of reformate.
Owning a refinery in the middle of the fastest growing shale crude basin sounds like a good idea. Calumet Specialty Products LP thinks so – they purchased the 14.5 Mb/d San Antonio refinery in December 2012 located at the heart of the Eagle Ford. Since then Calumet has set about expanding production and organizing more efficient crude transportation. But owning such a small refinery near the largest refining region in the world has its risks. Today we describe how location and crude supply advantages help keep this refinery competitive.
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.
Rising Uinta crude production will run into a refining capacity ceiling unless new routes to market are developed. The distinctive black and yellow waxy crudes produced in Utah are largely refined locally in Salt Lake City refineries because of the challenges transporting them. However new refineries, rail load terminals and even a heated pipeline are all being planned to increase takeaway capacity to absorb growing production. Today we continue our analysis of Uinta Basin crudes.
The strange looking yellow and black waxy crudes produced from the Uinta Basin in Utah since the 1950’s resemble shoe polish at room temperature. Because of the complexity of transporting these waxy crudes over long distances, they have traditionally been consumed by close by Salt Lake City refineries. However, just like many other US production basins these days, Uinta production is increasing – up from 53 Mb/d in January 2011 to an estimated 88 Mb/d this month (August 2013 - source Bentek). Continued production expansion depends on finding new refining capacity or routes to distant markets. Today we begin a series on crude from the Uinta Basin.
The West Texas Intermediate (WTI) discount to Brent has been as wide as $27/Bbl in the past two years and traded at an average of $17.50/Bbl in 2012. Since February this year the spread has narrowed 80 percent to less than $5/Bbl – closing at $4.55/Bbl on Friday (July 5, 2013). Surging WTI prices are over $100/Bbl for the first time since May 2012.Today we look at what is behind the recent sudden narrowing in the spread.
By Al Troner, President Asia Pacific Energy Consulting (APEC)
Historically U.S. condensate production has been in the backwater of crude markets, dumped into local crude flows or more recently exported to Canada for use as heavy crude diluent. In stark contrast, the separation and processing of condensates in East of Suez markets is a major downstream activity, accounting for much of the Mideast Gulf’s naphtha exports and Asia’s feedstock supply. As U.S. condensate production increases, it is clear that new markets will be needed for the volumes – with suppliers eyeing those robust East of Suez destinations. Today we continue our blog series on international condensates examining splitter/processing capacity in the Middle East and Asia Pacific regions.