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Obama said ready to push partial Keystone XL approval

Obama will be in Cushing, Okla., the start point of the pipeline’s southern half on Thursday

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The Keystone XL project will extend TransCanada Corp.‘s Keystone pipeline that carries oil from northern Alberta to refineries in the United States. (TransCanada Corp.)

U.S. President Barack Obama is reportedly set to announce in Oklahoma this week that he’s expediting the permit process for the southern half of TransCanada’s controversial Keystone XL pipeline.

Citing a senior administration source, CNN reported on Tuesday that Obama wants to slash several months off a permit approval process that can ordinarily stretch on for as long as a year.

The administration wants to speed things up to deal with a glut of oil in Cushing, Oklahoma, where crude from the Midwest runs into a logjam on its way to refineries on the Gulf of Mexico.

Obama will make the announcement Thursday at a storage yard in Cushing, the starting point of the pipeline’s southern half.

Pipes that will be used to build Keystone XL to the Gulf Coast are being housed at the facility.

Gas prices rising

The announcement comes as prices at the pump continue to soar. Republicans are blaming Obama’s energy policies for rising gas prices and continue to attack him for rejecting Keystone XL in January.

The U.S. average price for a gallon of gasoline rose for the 11th straight day on Tuesday to $3.85 US, and soared to $4 a gallon in some states. That would amount to a little over a dollar a litre in Canada.

Millions of barrels of unrefined crude are sitting in storage facilities in North Dakota, in particular, but there’s a lack of pipeline capacity to carry it to the Gulf Coast and a limited number of rail cars that can transport the oil south. The state is currently in the throes of a major oil boom thanks to the discovery of the so-called Bakken Shale.

Obama’s recent praise of Calgary-based TransCanada’s decision to proceed with the construction of the southern segment of the pipeline signalled a shift in attitude from the White House after it rejected the pipeline outright in January.

The entire length of the proposed, $7.6 billion pipeline would stretch from Alberta’s oilsands through six U.S. states to the Gulf Coast.

No decision from State Dept.

The U.S. State Department has yet to make a decision on the pipeline, saying it needs more time to conduct a thorough environmental review of a new route around an environmentally sensitive aquifer in Nebraska. State department officials are assessing the project because it crosses an international border.

In November, under mounting pressure from environmentalists, the State Department deferred making a decision on Keystone until after this year’s presidential election, citing concerns about the risks posed to the aquifer.

Pipeline proponents cried foul, accusing Obama of making a cynical political move aimed at pacifying the environmentalists of his base and improving his chances of re-election.

Republicans then held the administration’s feet to the fire, successfully inserting pipeline provisions into payroll tax cut legislation in late December.

Within a month, facing a mid-February deadline imposed by that measure, Obama nixed TransCanada’s existing permit outright, saying there wasn’t enough time to thoroughly review a new route before giving it the green light.

But Obama also assured Prime Minister Stephen Harper that the decision did not reflect on the pipeline’s merits, but was merely necessitated by Republican pressure tactics. He welcomed TransCanada to propose another route.

Source

Ironically Texas May Be Forced To Export Unrefined Crude By 2012

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.

This is now a problem for some companies, as their own refinery’s need the heavy sour crude’s to fuel these their product runs. What are they to do with a flood of light to super light sweet crude’s?

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.

Eagle Ford shale crude’s gravity ranges from 42 API to 60 API with very low sulfur content, which in the US Gulf Coast refining terminology is considered a super light crude.

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.

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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.

Seaway Pipeline gets turned around; oil markets react quickly

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By John Kingston

Here are some of the questions we’ll be pursuing regarding the reversal of the Seaway Pipeline, announced earlier this morning as part of the sale by ConocoPhillips of its 50% Seaway stake to Enbridge Energy Partners.

–The Brent/WTI spread has been less than $10/b on the news, a movement of as much as $3/b in one day. It’s been as wide as $27 in recent months. We wrote about a prominent analyst predicting it would go to $40.

But here’s another number: $7. That’s the figure that has been thrown about loosely about how much it costs to move a barrel of crude out of the Bakken by rail to the Gulf of Mexico or to other points. There is obviously a great deal of variability depending on where the oil is going. But the key point is if the Brent/WTI spread continues to narrow on both the news and the early 2012 start of 150,000 b/d of crude moving down Seaway to the Gulf of Mexico, does the spread narrow so much that the $7 train ticket for a barrel of crude become too steep? And if that happens, does the Seaway reversal, at a certain point hinder rail enough that it makes that option for moving Bakken crude less competitive?

–There are numerous non-US crude grades that can be delivered against the NYMEX crude contract. You can find them here; go to page 4.

When the NYMEX light sweet (i.e., WTI) price was consistently more than the Brent price, the deliverability of those grades always acted as a brake against the price of WTI running away from the rest of the market, due to its disconnected state from the rest of the world. If Merc crude got too high, the deliverability would allow these grades to be moved up Seaway and delivered against the Merc contract, keeping the Merc price in check. This became moot when the price of WTI collapsed relative to Brent. But the other deliverable crudes remained on the books.

Without Seaway running from the Gulf of Mexico to the NYMEX delivery point of Cushing, Oklahoma, how could those grades get there? So do they remain as deliverable crudes?

–The quick hit list of winners and losers might look something like this:

Winners: Gulf Coast refiners, with pipeline access to all the oil sands and Bakken crude flowing into Cushing; North Dakota producers (if they can get the oil from the Bakken down to Cushing in the first place); Enterprise Partners, who won’t need to build the Wrangler Pipeline to capitalize on the need for a Cushing-Gulf Coast crude line, since it will own 50% of a now reversed Seaway Pipeline

Losers: exporters of crude to the US, whose market into the Gulf Coast may close a bit as more oil drains from tanks at Cushing and down to the Gulf Coast; railroads, for the reason listed above; possibly the Keystone XL Pipeline, if its MarketLink section from Cushing to the Gulf gets pushed aside by Seaway (as if it didn’t have enough other things to worry about, and also the fact that TransCanada officials said today it could compete); Midcontinent refiners who almost certainly will see their tremendous refining margins shrink.

Source – The Barrel

Conoco’s Brent Control

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Jenga! ConocoPhillips just knocked a big hole in the delicate logistical edifice on which the biggest anomaly in the oil world has been balancing.

In oil markets, 2011 has been the year of the great Brent spread. The North Sea crude oil benchmark has been trading at an unusually high premium to U.S. West Texas Intermediate oil for much of the year after many years of rough parity or trading at a slight discount.

On one side, the Libyan conflict pulled up demand for Brent. On the other — as discussed in this “Heard on the Street” column from February — logistical constraints have kept an increasing amount of oil bottled up in the Midwest. As Cushing, OK is where the WTI contract is settled physically, this glut has kept WTI prices depressed, widening the spread. Having started the year trading at a premium of $3.37 a barrel to WTI, Brent’s lead hit a peak of almost $27 on September 6th.

Now one of those bottlenecks on WTI is likely to be eased. Conoco is selling its 50% stake in the Seaway pipeline to Canada’s Enbridge Inc. Conoco kept the pipeline running northwards, i.e. bringing oil from the Gulf coast to Cushing. This kept oil bottled up in the Midwest, meaning Conoco’s refineries there had access to cheaper raw material, allowing them to generate big profits. Now that Conoco is splitting itself, it has no need for Seaway. And Enbridge, as a pipeline operator, has no incentive to keep the pipeline flowing north. By the second quarter of 2012, it expects Seaway to be transporting 150,000 barrels per day from Cushing to the Gulf coast, alleviating the WTI glut.

As of now, Brent’s premium to WTI has collapsed another $2.37 this morning, and is now down under $11 a barrel. As more pipelines get built over the next several years — including, perhaps, a rerouted Keystone XL — the great 2011 spread will be but a fond memory in oil refiners’ minds.

–  Liam Denning

Source

Enterprise, Enbridge look to Port Arthur access

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NEW YORK, Nov 16 (Reuters) – Enterprise Partners and

Enbridge plan as part of the reversal of the Seaway pipeline

project to build an 85-mile (135-km) pipeline from its ECHO

terminal in Houston to refineries in Port Arthur, a spokesman

for Enterprise said on Wednesday.

The pipeline’s open season to garner shipper commitment

will happen early in 2012.

‘It will allow heavy Canadian crude access to Port Arthur

refineries,’ said Rick Rainey, spokesman for Enterprise.

(Reporting by Janet McGurty)

ConocoPhillips Sells $2B in Pipeline Assets

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by  ConocoPhillips

ConocoPhillips announced that as part of its ongoing strategy to create shareholder value it has entered into agreements to sell its interests in two U.S. pipeline companies for a total of $2 billion.

ConocoPhillips has entered into definitive agreements with a subsidiary of Caisse de dépôt et placement du Québec (CDPQ) to sell its 16.55 percent interest in Colonial Pipeline Company and Colonial Ventures LLC (Colonial). The transaction is anticipated to close in the first quarter of 2012 following the completion of contractual Rights of First Refusal review by the existing shareholders in Colonial.

In addition, ConocoPhillips has entered into definitive agreements with Enbridge Holdings (Seaway) L.L.C., a subsidiary of Enbridge (U.S.) Inc., to sell its ownership interest in the Seaway Crude Pipeline Company (SCPC). The transaction is anticipated to close in December, subject to satisfaction of customary conditions precedent and completion of certain arrangements regarding other logistics services currently provided by SCPC to ConocoPhillips.

“These two sales of non-core pipeline assets are important components of our $15-20 billion divestiture program for the years 2010-2012. We are pleased that CDPQ and Enbridge have recognized the value of these quality assets,” said Al Hirshberg, senior vice president, Planning and Strategy, ConocoPhillips. “Through September 2011, the 2010-2012 divestiture program has yielded proceeds from asset dispositions of $8 billion. Once closed, these two transactions, along with other sales already closed in the fourth quarter, would increase that total to approximately $10.5 billion, and strongly position us to accomplish our target by the end of 2012.”

The sale of the Colonial and Seaway interests is just one part of ConocoPhillips’ plan to create value for shareholders through a continued focus on disciplined capital investment, a strengthened financial position, improved returns on capital, and growth in shareholder distributions.

Source – RIGZONE

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