The US oil industry is in a bit of a quandary. The Houston & Louisiana refining area is the largest in the world. It has just had tens of billions of dollars thrown at it, to prepare it to run heavy sour sources. These heavy sour grades are typically cheaper, and contain lots of secondary products during the refining process.
In simple terms, we have spent the last twenty years preparing to make more out of lower quality oil. It was a great idea, when the handwriting on the wall said these would be the only real sources of future growth in hydrocarbon volumes.
If they ran this stuff, they would have to turn off a significant number of units at their refinery’s that are designed to capture and crack the heavy sludge. This leave the US refining patch in a bit of a jam.
The new Eagle Ford shale oil is coming online in large volumes. Rumors are that Eagle Ford production will crack 500,000 barrels by the end of 2012, if they can get around localized shipping constraints.
Right now it is the gathering of the stuff in quantities that are easy to ship/export that is the issue.The crude is so light in some places, they need specialized trucks to collect it and bring it to a gathering location. There isn’t the capacity to pick up the crude and bring it to market available right now.
We are talking about 100,000 barrels of oil production behind pipe right now, and growing daily as people rush to install new smaller capacity pipelines around Texas to help haul it away.
The number of companies that believe they can growth their domestic production by 100,000 barrels of oil in the next couple of years is growing.
The irony is that the new supply is super light & sweet. A mix never expected in the US again.
Platts had an article on this exact topic in June of 2011.
The US could resume exporting some of its domestic crude oil production in 2012 when the output from Eagle Ford Shale in Texas ramps up.
But that’s the problem for US refiners: they aren’t built to process that type of crude. So the highest value for it may be outside the country.
The US exports may be to the US East Coast first. The refinery’s based on the east coast tend to have a higher sweeter demand over their Southern units.
In fact, the blow out in Brent prices has severely affected their profits due to sourcing costs increasing significantly this spring with the Libya revolution. There have been at least 3 refinery’s put up for sale or being put into mothballs until a cheaper source of crude is available.
“U.S. east coast refining has been under severe market pressure for several years. Product imports, weakness in motor fuel demand and costly regulatory requirements are key factors in creating this very difficult environment,” ConocoPhillips said when it put Trainer on the auction block.
If the three refineries on the block shut down, what does this mean for oil markets?
In the case of the US, if Texas starts to export light sweet crude by large barges to the east coast. You could see a Renaissance in US exports of refined products as these units produce above domestic demand needs.
The irony is that in the US we have removed the demand for the lighter sweet crude’s, so much so we will soon be exporting it from our primary refining center due to excess capacity in supplies. NOT DEMAND.
The energy crisis of 2005 is not the supply crisis everyone was looking for. I wonder how long it will take society to catch up to the new reality. The US is going to become an energy exporter, even if its Texas shipping crude to those Yankees up north.
Before you fall out of your chair laughing, look at this chart, conceptualize it, and then leave me a comment in the section below. I look forward to your thoughts on this chart.
It’s a chart of barrels of oil produced per year from a specific zone in Texas. It will double every year for the next few. Then think about other new zones like it coming online in the next few years. Its a small amount today, but a not so small amount by tomorrow.
- Platts Eagle Ford
- The Globe & Mail Bleak times for US Refinery’s
- Texas Railroad Eagle Ford Production Chart
- Alice considers building multipurpose convention center amid Eagle Ford boom (mb50.wordpress.com)
- “The Play”: Cuero awakens to new shade of green (mb50.wordpress.com)
- Keystone XL Pipeline: Just Build It – 24/7 Wall St. (mbcalyn.com)
- Ironically Texas May Be Forced To Export Unrefined Crude By 2012 Read (mb50.wordpress.com)
- Enbridge, Enterprise Products To Reverse Seaway Crude Oil Pipeline (mb50.wordpress.com)
- Seaway Pipeline gets turned around; oil markets react quickly (mb50.wordpress.com)
- Conoco’s Brent Control (mb50.wordpress.com)
- Enbridge buys 50% of Seaway pipeline (theglobeandmail.com)
- Oil in New York Surges Above $100 on Reversal of Seaway Pipeline (mb50.wordpress.com)
The bill, filed by Sens. Bob Rucho, R-Mecklenburg, Harry Brown, R-Onslow, and Tommy Tucker, R-Union, would direct Perdue, a New Bern Democrat, to enter into a pact with the governors of Virginia and South Carolina to urge President Obama to open the East Coast for energy exploration.
Sponsors of the bill say that they’re hoping to explore natural gas off the coast of North Carolina and step up efforts to provide for wind energy.
“North Carolina’s coast has been identified as probably the best source for wind energy,” Brown said during a Wednesday press conference at the Legislative Building.
“We have a great opportunity to explore and determine if there are natural gas deposits off our coast,” Rucho said. He said if such deposits exist, it could create thousands of jobs for the state.
Rucho said that one of the goals of the bill is helping the ease the nation’s energy problem. He called the high gasoline prices in the nation an “economy buster.”
Molly Diggins, state director, of the North Carolina chapter of the Sierra Club, said the effort to explore wind energy sounded good to her.
“We certainly agree that there’s a tremendous energy bonanza off the coast in off-shore wind,” Diggins said.
But she wasn’t as enthusiastic about the possibility of opening up areas off the state’s coast for offshore drilling.
“Offshore drilling remains high risk and low benefit,” Diggins said.
Bill sponsors hope that by forming a pact with Virginia and South Carolina, they can encourage President Obama and Congress to not only open the federal waters for offshore exploration but provide the state royalties if gas is found. Those royalties could come to about $500 million a year, Rucho said.
Money would go to the state’s general fund, the Highway Trust Fund, the community college system, the UNC system and to the state’s conservation programs. Some money would go to the state ports for expansion and to the recruitment of energy-related industries.
The senators rolled out their bill on the one-year anniversary of the BP oil disaster in the Gulf of Mexico. Rucho acknowledged the coincidence and said that companies drilling for energy offshore had learned from past mistakes.
By Tom Doggett
WASHINGTON | Thu Apr 14, 2011 8:58am EDT
(Reuters) – Republican lawmakers in the House of Representatives on Wednesday pushed a trio of bills through a congressional committee that would boost offshore oil drilling and ease some regulations on oil companies.
Republicans said the bills would reverse the Obama administration energy policy of the last two years that they claimed has reduced domestic oil production and made the United States more reliant on foreign suppliers and vulnerable to oil price spikes.
“Congress must take action to increase energy production,” said Representative Doc Hastings, who chairs the House Natural Resources Committee that approved the three bills.
The legislative action comes as oil and gasoline prices are soaring and the Energy Department forecasts U.S. oil production in the Gulf of Mexico will decline by 190,000 barrels per day this year and in 2012.
Democrats countered that with the one-year anniversary of the BP oil spill next week, now is not the time for Congress to open new areas to drilling and weaken offshore safety regulations.
“This legislative package reflects a pre-spill mentality of speed-over-safety,” said Representative Edward Markey. “It would open up huge swaths of our coasts to drilling, without first applying any new safety standards learned from the BP disaster.”
The legislation is likely to clear the full House of Representatives next month, but it probably will not find enough support in the U.S. Senate to pass. The White House would likely threaten a veto on the legislation as well.
The three bills would require the Interior Department to lease tracts in the Gulf of Mexico and off the Virginia coast, new areas the Obama administration delayed from development after the BP oil spill.
Leasing could also occur off most of the U.S. Atlantic Coast and the West Coast.
The department would have 60 days to review and decide whether an oil company’s new drilling permit should be approved. Permits that were cleared before the White House imposed a drilling moratorium after the oil spill would be restarted within 30 days.
The legislation also commits the Obama administration to higher domestic oil and gas production, requiring the White House to boost offshore oil production to 3 million barrels a day and natural gas output at 10 billion cubic feet each day in the government’s upcoming 2012-2017 offshore drilling plan.
Those production goals would have to be met by 2027, allowing companies 10 years to fully develop the offshore tracts they lease.
(Reporting by Tom Doggett; Editing by Gary Hill)
( Original Article )