Jan 15, 2013
Reuters photographer Akintunde Akinleye recently gained rare access to an illegal oil refinery near the river Nun in Nigeria‘s oil state of Bayelsa. There, he was able to document the secret and dangerous practice of oil bunkering, where locals hack into oil pipelines, steal the crude oil, and refine or sell it abroad. For over 50 years now, crude oil and natural gas have been extracted from the Niger Delta by large corporations, which have had their share of environmental disasters. The ongoing damage from the tapped pipes and these makeshift refineries continue to take a terrible toll on the environment and the local population. See also “Nigeria: The Cost of Oil” from 2011. [30 photos]
More photos: Source
Excitement continues to run at very high levels, over the rebound in US crude oil production. Coming out of the new, historic low of 4.95 mbpd (million barrel per day) in 2008, the annual average of US production in the first 4 months of 2012 is currently on pace at 6.156 mbpd. This new production has largely been made possible by the price revolution in crude oil, which finally broke through the long-term, $25 ceiling during 2003-2004, and which is now mostly sustaining marginal production around the $90 level. A question: has the US, since its own production peaked near 10 mbpd in 1971, seen this kind of production rebound before? Let’s first take a look at the past decade. | see: US Average Annual Oil Production mbpd 2001 -2012
If maintained, the current rebound would add back a little more than a million barrels a day to US production, compared to the 2008 low. Some analysts fervently believe that, despite ongoing declines from existing US fields, that production will go even higher into the end of this decade. Well, just leaving that issue aside for now, given that so much of this new production depends on sustained high prices, let’s briefly take a look at a previous rebound in US oil production. | see: US Average Annual Oil Production mbpd 1972 -1985
Coming out of the 1976 low, at 8.136 mbpd, US production rebounded over the following 9 years by 800 kbpd–not quite a million barrels per day. However, a volume comparable to the current rebound. Afterwards, the 40 year decline in US production resumed its decline.
The course of US production into 2020 will be more dependent than usual on price. An increasing portion of total global production is crowded into the marginal price band of $80-$100 a barrel, and yet the world economy appears to struggle–on the demand side–at that very same level. Thus, new marginal production in the US and elsewhere is fated to continually pass back and forth, in and out of the domain of economic viability, as the world economy chokes, recovers, and chokes on high oil prices.
Shell Pipeline today announced that its Ho-Ho pipeline reversal project (“Ho-Ho Reversal”) is progressing as per plan, based on shipper requests and new crude production and infrastructure coming online.
After the completion of this project, shippers will have access to markets and connectivity in Nederland and Port Arthur, Texas.
Through a Declaratory Order, the Federal Energy Regulatory Commission (FERC) recently approved the contract rates and capacity allocation for the Ho-Ho Reversal project. Shell Pipeline welcomes this decision that further supports this project.
The initial phase of Shell Pipeline’s Ho-Ho Reversal project will move crude oil from connecting pipelines and terminals in East Houston to Nederland and Port Arthur, thereby supplying the refining complex across the region with crude from Eagle Ford and Permian, as well as crude supplies from the Cushing, Oklahoma area. Phase I of the Ho-Ho Reversal project is designed to complement the new pipeline infrastructure that is currently being built to the Houston area.
About Shell Pipeline Company LP: For more than 80 years, Shell Pipeline Company LP has helped meet America’s energy needs. We transport more than 2 billion barrels of crude oil and refined products annually through thousands of miles of pipelines located in seven states.
- Enterprise Products, Enbridge Announce Completion Of Seaway Pipeline Reversal (mb50.wordpress.com)
(RTTNews.com) – Enterprise Products Partners L.P. (EPD) and Enbridge Inc. (ENB, ENB.TO) said Thursday that modifications to the Seaway crude oil pipeline allowing it to transport crude oil from Cushing, Oklahoma to the U.S. Gulf Coast have been completed.
According to the companies, the pipeline is in the process of being commissioned, and the first flows of crude oil into the line are expected to begin this weekend.
The reversal of the 500-mile, 30-inch diameter pipeline, which had been in northbound service since 1995, provides North American producers with the infrastructure needed to access more than 4 million barrels per day of Gulf Coast refinery demand.
The reversal will initially provide 150,000 BPD of capacity, which is expected to increase to more than 400,000 BPD in the first quarter 2013 with additional modifications and increased pumping capabilities.
Seaway Crude Pipeline Company LLC is a 50/50 joint venture owned by affiliates of Enterprise Products Partners and Enbridge Inc. In addition to the pipeline that transports crude oil from Cushing to the Gulf Coast, the Seaway system is comprised of a terminal and distribution network originating in Texas City.
For comments and feedback: contact email@example.com
The energy industry has the appearance that it is about to undergo a major shift in pricing structures again. We saw it lately with the spread between crude and NG blowing out. We have seen signs of it happening in Brent and WTI before, and I expect we will see new signs of it again.
To be clear, we could see extremely expensive Brent oil, as international supply fears increase with tension in Iran. This would be happening while the price of WTI, a lighter sweeter standard, crashes in US terms do to its own over supply and lack of demand issues.
This would all be happening under a backdrop of world markets bidding for refined products from a US export happy refining complex. This would lead to US gasoline prices hitting all-time highs, while refinery complexes in the US Midwest would have the highest profit margins in their history.
The US Midwest is growing its own domestic sources of oil, while its own capacity to ship the oil out is limited. This causes a bottle neck in exports in the region. This is causing the price locally to crash.
The planned refinery work in the Midwest has lowered the take-off demand for Bakken oil. This is happening inside of a window of time while the Bakken production sets all new production records every month.
This is causing the price of oil in the Midwest to crash in localized markets, as the take-off capacity does not equal the supply of new barrels. The region is buried in supply, all of which is now seeking a path to Houston refining complex.
The price difference of an equivalent grade of oil in Bakken Terminals & Louisiana terminals is now $40. This imbalance in like qualities will generate a short term arbitrage trucking bonanza, as the profit per trip approaches silly levels.
I expect to hear about a fleet of white trucks driving loads of crude oil from the Midwest to the refining complexes with accessible pipelines capacities. You don’t have to drive it all the way there, to deliver it.
I wish I had a fleet of modern fluid haulers right now. There is more oil supply in the Bakken then local demand, and that won’t change much when the refinery’s turn around. The Bakken supply is still growing every month, and will for a while.
The growth in rail take off capacity will not keep up with the growth in new oil production in the near to intermediate term. This will lead to price differentials that will last longer than people expect. There is always a profit to be made when these events happen. It will be interesting to see who ends up owning those fleets of white trucks.
Just like the old gold rush stories of stores making more then people digging for gold. There just might be more money made in shipping the oil by truck, then there is in producing it, or refining it. As they say, this could get interesting in the near term.
Read more: BI
- Conoco’s Brent Control (mb50.wordpress.com)
- Brent WTI Back To $20 – Some Thoughts On What’s Next From Goldman (zerohedge.com)
- Seaway Pipeline gets turned around; oil markets react quickly (mb50.wordpress.com)
- Seaway pipeline creates contango with oil glut (mb50.wordpress.com)
- JP Morgan Hikes 2012 Crude Price Target To $110 On Seaway Reversal (zerohedge.com)
- InvestmentOptions.Net Releases Response to President Obama’s Decision to Reject Keystone Pipeline (prweb.com)