by ROCKMAN » Sat 09 Nov 2013, 23:37:37
The interesting side note to the expansion of EFS oil production isn't the volume but where it's going. From Rig Zone: " Energy Transfer Partners will convert a Texas natural gas pipeline system to move Eagle Ford shale crude and condensate to Trafigura's Corpus Christi terminal, the companies said on Thursday. The agreement calls for Energy Transfer to convert the 82-mile (132 km) pipeline system to move about 100,000 barrels per day of crude and condensate from the prolific shale oil play to Trafigura's growing terminal operation. The converted South Texas pipeline system is expected to start up in the next nine months to a year. They are also is building a second deepwater dock, 850 feet long with a 45-foot draft, capable of loading an Aframax vessel at the Corpus Christi terminal. When finished by the first quarter next year, the second dock, combined with existing infrastructure, will allow Trafigura to berth three medium-range tankers and two inland barges simultaneously. The terminal's capacity also will increase. Since mid-2011, Trafigura has delivered Eagle Ford crude and condensate, offloading output from trucks onto barges for shipment to U.S. Gulf Coast terminals. Jeff Kopp, Trafigura's director of oil for North America, said the project will give Eagle Ford producers the "maximum amount of flexibility" to get their output to markets.
What's interesting is that they don't care to explain the "maximum amount of flexibility" aspect. It's the ability to not only haul oil to Gulf Coast refineries but also to ones in eastern Canada. Thanks to another previously reversed pipeline at least 50,000 bbls per day of EFS oil is being shipped to Corpus Christi where tankers wait 10 - 20 days to be loaded before they haul the oil up the east coast to the Canadian refineries. As described below it's more profitable, despite the shipping costs, to do so.
And another surprise for folks who have been distracted over the plans for the Keystone Pipeline system to ship Alberta oil to the US: were you aware that almost 200,000 bbls of US oil has been shipped via a pipeline to Alberta with plans to increase to over 300,000 bpd? From Rig Zone again: How to Profit From Canada's Crude Oil Shortage
"Yes, you read that headline correctly. In spite of surging production from the Alberta oil sands, Canada is in the midst of an oil shortage. According to the Canadian Association of Petroleum Producers, bitumen output from the Alberta oil sands is projected to double by 2022 to 3.8 million barrels per day. The problem with bitumen is that it's too thick to flow freely on its own. It must be mixed with a super-light oil called condensate so that it can be shipped through pipelines. With growing oil sands production, condensate demand is poised to sky-rocket as well. Based on estimates provided by the Energy Resource Conservation Board, the demand for condensate in Alberta could double to 650,000 bpd within the next decade. Today, condensate is the most prized hydrocarbon in Alberta with the light oil trading for a 10% premium over West Texas Intermediate. Analysts fear shortages could result as imports struggle to keep up with demand.
Yet south of the 49th parallel, the United States is facing a condensate glut. In the Texas Eagle Ford, condensate production accounts for as much as 30% of output. With forecasters projecting Eagle Ford production to exceed one million barrels per day by next year, much of that will be condensate. But here's the problem. Nearby Gulf coast refineries aren't well equipped to handle the super light oil bubbling out of the Texas shale. Over the last decade, refineries spent billions of dollars outfitting their plants to process heavy sour blends. Additionally, refining condensate isn't profitable. The light oil doesn't produce the higher value distillates used to make diesel or jet fuel. So with an unexpected surge in condensate production and low demand from refineries, you have a recipe for low prices. In general, Gulf coast refineries have been paying $15 per barrel less for condensate than light oil varieties. That's great for downstream marketers. But that discount is coming right out of the pockets of shale producers.
Canada needs condensate. The U.S. has too much of the stuff. The challenge is moving it. Who's poised to profit? At the moment, the only way to export condensate to Canada is through the Enbridge Southern Lights pipeline which transports 180,000 bpd from Illinois to Alberta. The problem is shipping condensate from Texas to Patoka, Illinois where the line begins. Kinder Morgan Energy Partners is trying to position itself as the leading condensate shipper. The company built a condensate pipeline that can move 300,000 bpd from the shale basin to the Houston area. From Houston, condensate can be shipped through a third-party Explorer pipeline to Hammond, Illinois. Admittedly Illinois is still on long way from northern Alberta. To get the condensate the rest of the way Kinder Morgan has two strategies. First, extend the Explorer pipeline to connect with Southern Lights. That link should be in service by 2014. Second, connect Explorer to the company's existing Cochin pipeline. Propane volumes along the route have been in decline anyway. The company is looking to reverse and expand Cochin to start shipping condensate to Alberta.
At the moment, the only way to export condensate to Canada is through the Enbridge Southern Lights pipeline which transports 180,000 bpd from Illinois to Alberta. The problem is shipping condensate from Texas to Patoka, Illinois where the line begins."
And since none of these plans require a new border crossing pipeline no approval of the POTUS is required. Also notice the flexibility to ship EFS oil via tanker to Houston from where it can be pipelined to Alberta. This might seem like an exorbitant amount of oil movement but remember it's a system designed to handle not $billions of future commerce but $TRILLIONS.