By:  Bob van der Valk
Dateline:  Terry, Montana

  • US consumption estimated at 18.76 million b/d in 2012 and 18.88 million b/d in 2013 (EIA)
  • Only expected to recover to between 21-22 million b/d through 2035 (EIA)
  • Light / medium crude oil imports to US Gulf could be eliminated by 2014/2015 from rising Canadian pipeline deliveries and domestic production
  • Heavy crude imports from Venezuela and Mexico should continue in medium term
  • January-March crude imports from Venezuela and Mexico were 845,000 b/d and 995,000 b/d respectively

Political developments could influence stability of Venezuelan supply

► USAC (PADD 1) crude imports YTD are 1.5 million b/d, roughly 10% below 2008 levels

► USGC (PADD 3) crude imports YTD are 5.8 million b/d just over 15% below 2008 volume

► US crude stocks (excluding SPR) currently at 387 million barrels – highest level since July 1990

► Total US refinery utilization at 91.9% of capacity – spurred by export opportunities – week ending June 15

► PADD 3 operating at 93.2% and PADD 1 at 81.3% of capacity

US Crude Oil Production

► US crude production expected to 6.3 million b/d in 2012 versus 5.7 million b/d in 2011 (EIA)

► Production currently at 6.26 million b/d – strongest figure since July 1998

► 2013 crude production expected to rise by a further 400,000 b/d

► North Dakota production at 575,000 b/d in March – highest level on record

► Texas crude output at 1.7 million b/d in March up almost 30% year-on-year

► Heavy investment by Shell to start off-shore drilling in Alaska with reserves estimated at around 25 billion barrels further releasing domestic supplies

 

Bakken Crude Update

►Bakken field in North Dakota expected to produce around 600,000 b/d in 2012 and 650,000-700,000 b/d in 2013 – Breakeven point between US $40 $60 per barrel – WTI basis

► North Dakota rail export capacity increased from roughly 310,000 b/d in 2011 to 470,000 b/d and may be 700,000 b/d by year’s end

► Pipeline capacity at almost 440,000 b/d in Williston Basin (Eastern Montana, North Dakota, South Dakota)

► Bakken crude has approximately US $10/bbl and US $20/bbl discount to spot WTI/Dated Brent providing refiners in all PADDs to incentive gain access to supply

► Crude flows to East, West and Gulf Coasts as rail capacity expands and price differential entices refiners through reduced acquisition cost

► BNSF – controls roughly 75% of North Dakota exports – recently announced US $85 million railroad maintenance & expansion project

Pipeline Updates

► Enbridge to reverse the 240,000 b/d Line 9 pipeline from East to West from Sarnia, Ontario to Montreal

► After regulatory approval and infrastructure maintenance flows to begin spring 2014

► Crude to be sourced from Alberta, Saskatchewan & Manitoba and will primarily consist of light-sweet oil

► Used to feed the Nanticoke refinery (120,000 b/d) and process Canadian crude not foreign imports

► May lead to reversal of Portland, ME to Montreal, Canada pipeline

► Crude from Portland, ME would be required to sail on Jones Act vessels to PADD 1 refineries

► Total flows from Cushing to the USG will total 1.1 million b/d from these projects by 2013

Pipeline Updates

► Seaway pipeline has been reversed since mid-May delivering 150,000 b/d from Cushing, Oklahoma to US Gulf

► Seaway expansion to 400,000 b/d planned to be complete late 2012 / early 2013

► Southern leg of Keystone XL – Gulf Coast Project – construction will begin mid-2012 and should be completed by early 2013

► Gulf Coast Project will deliver crude from Cushing Oklahoma to the US Gulf with a capacity of 700,000 b/d with expansion potentially to 830,000 b/d

► This will eventually be linked to Keystone XL originating in Alberta

US Crude Oil Imports

► Nigerian imports contracted roughly 75% since March 2007 to March 2012 to approximately 10.5 million barrels (340,000 b/d)

► This was roughly 4% of total US imports compared to 10% in 2010

►  Reduction in Suezmax requirements (March 2007 to March 2012) was equal to 37 vessels

► Canadian imports rose to highest level on record of 76.4 million barrels (2.5 million b/d) – March 2012

► Imports from Saudi Arabia comparatively steady at 42.5 million barrels (1.4 million b/d) and still constitute around 15% of total import volumes

► Reduced spread between Dated Brent and WTI might help increase the attractiveness of West African grades

 

The above information was provided by McQuilling Services with additional data obtained from Oil Price Information Service at www.opisnet.com

 

 

 

 

 

Crude oil production in the Bakken rose almost 5 percent from April’s output. The number of producing oil wells went up more than 3 percent. There are almost 7,000 producing oil wells in western North Dakota, which is almost twice as many wells as it had five years ago, and crude oil production has increased five fold.

Meanwhile a dispute between Canadian pipeline Enbridge Energy LP and Saddle Butte Pipeline is brewing into what could become a political showdown between the two countries over whether Bakken oil production will be squeezed out by Canadian oil sands crude oil flowing from across the northern border.

The subsidiary of Saddle Butte – High Prairie Pipelines LLC is accusing Enbridge of denying its request to directly link a proposed 450-mile pipeline from the booming Bakken oil fields in North Dakota and Eastern Montana to a highway of pipelines currently feeding crude oil to Midwest East Coast refineries.

Saddle Butte is attempting to connect its High Prairie Pipeline to Enbridge at Clearbrook, MN. However, Enbridge Energy has so far refused to allow a pipeline interconnection by High Prairie Pipeline at its facility in Clearbrook, MN.

Even though oil prices have been falling, North Dakota’s crude oil production has been continuing to increase. The ND Department of Mineral Resources reported oil producers pumped an average of 639,000 barrels of oil each day in May 2012 or almost 20 million barrels of crude oil for the month.

Currently most the Bakken crude oil is being hauled to refineries and the Cushing, OK hub by rail car. The Keystone XL (KXL) pipeline is about two years away from being completed from Alberta, Canada to Cushing, OK. The permit for construction and operating the southern leg of the KXL from Cushing to the Gulf Coast has now been approved by the state agencies involved and is expected to be completed by the end of 2013.

Bob van der Valk is a petroleum industry analyst working and living in Terry, Montana. He can be contacted at (406) 853-4251 or e-mail: tridemoil@aol.com

His viewpoints about the petroleum industry are posted on his web page at: http://www.4vqp.com/pages/12/index.htm

Some data in the above article was obtained from E & E Publishing as well as Oil Price Information Service (OPIS) at www.opisnet.com

Photo courtesy of Travis W. Cooksey

By: Bob van der Valk
June 5, 2012
Dateline: Terry, Montana

The Irving Oil refinery in St. John, New Brunswick, Canada became the third oil refinery on the East coast to receive 72,000 barrels of Bakken crude oil in a delivery on June 2, 2012.

Irving Oil owns and operates a 300,000 barrrels per day (b/d) refinery and Bakken light, sweet crude delivery is expected to complement the refinery’s feedstocks, which could include both sweet and/or sour crude oil. Bakken crude should help boost St. John refinery’s refining profit margin known in the industry as the crack spread. Bakken crude oil is currently priced at about from $7 to $10 a barrel discount to the benchmark West Texas Intermediate (WTI) crude oil. Railroad tank car freight charges run at about 12-$15 a barrel to the East coast.

Irving could receive about 10,000-15,000 b/d of Bakken Oil crude when the rail delivery operations stabilize in Canada.

The other two Northeast refineries receiving limited volumes of Bakken crude are Phillips 66’s 238,000-b/d Bayway refinery via Global Partners and Sunoco’s 330,000-b/d Philadelphia refinery via Sunoco Logistics.

Bayway refinery is expected to raise its Bakken crude oil intake to about 57,000
b/d in the summer. The Philadelphia refinery is receiving about 20,000-30,000 b/d of Bakken crude oil, and volume could increase in the future, depending on the fate of the
Philadelphia refinery sale to Delta Airlines.

North Dakota March crude oil production jumped by 10.14% from the previous month to 575,489 b/d, according to the latest data issued by the North Dakota State Industrial Commission. About 95% of North Dakota crude production is from the Bakken field.

The information in this article was previously published by Oil Price Information Service (OPIS).

Bob van der Valk is a petroleum industry analyst working and living in Terry, Montana. He can be contacted at (406) 853-4251 or e-mail: tridemoil@aol.com

His viewpoints about the petroleum industry are posted on his web page at: http://www.4vqp.com/pages/12/index.htm

By: Bob van der Valk
Dateline: Terry, Montana
May 17, 2012

North Dakota March crude oil production jumped by 10.14% in April 2012 from the previous month to 575,489 b/d, according to latest data issued by the North Dakota State Industrial Commission.

About 95% of North Dakota crude production is from the Bakken field. The significant production increase pushes North Dakota ahead of Alaska as the second-highest crude producing state in the US.

They expected to surpass Alaska by the end of this year, but that came a lot sooner than expected, mainly because North Dakota production is rising quickly and Alaska (output) is declining,

Oil producers were eyeing the Bakken oil field in 2006, but production only began to pick up at a serious pace in 2009. North Dakota will continue to raise its crude production volume over the next few years.

High demand for the price-advantaged high quality crude oil barrels has produced some 17 operating trans-loading facilities in the Bakken oil fields of Eastern Montana and North Dakota. That number is expected to grow significantly in the near term as more projects are underway.

The specially equipped facilities allow truck deliveries of crude to be trans-loaded into rail tanker cars or barges for long-distance shipments to coastal markets.

However, in the Bakken, the crude oil trans-loading facilities offer only truck-to-rail services provided by the Burlington Northern Santa Fe railroad.

Players in the Bakken market include Northern Tier, Basin Transload, High Sierra, Centennial Energy, Rangeland Energy, Great Northern Midstream, North Dakota Port Services, Dakota Plains Transport, Plains, True Companies, Hawthorn Oil, Kinder Morgan/Watco, Hess, Savage and US development.

Their trans-loading facilities in the Bakken deliver the bulk of their shipments to Cushing, OK and the Gulf Coast, with limited flow to the Northeast and West Coast refineries.

Bakken oil crude production is currently right at 550,000-600,000 barrels per day (b/d) and is expected to go to more than 1 million b/d by 2015.