Monthly Archives: July 2014

Shale oil

Too much oil is not necessarily a good thing

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The United States is finding itself in a strange situation, where the bounty of so much unconventional crude oil is not yet manifesting itself at the refineries.

Simply put, US refineries, especially those in the Gulf Coast are better suited for the heavier, more sour crudes from places such as Mexico and Venezuela.

The U.S. hasn’t built a new oil refinery in at least 30 years, and the existing fleet in many cases reconfigured their plants to cope with the more heavy sour crudes that have been available in the international market. But the crude oil from places such as Eagle Ford in Texas are creating a problem for those refineries.

We are hearing reports that refineries are now spending capital on a “first wave” of modifications - mods which will bring quick returns for low investment. The next wave requires much larger investment and therefore a greater level of confidence that the shale boom and its flood of light sweet crude will continue for the full investment horizon.

Valero, which processes about 2.4 million barrels per day of crude across 10 refineries in North America, is gradually processing more light U.S. crude. The firm plans to spend about $750 million on two new refineries that will better handle oil from the Eagle Ford field.

“What you’re seeing is that as more of this light crude becomes available, there’s plenty of ability for North American Refineries to process it,” a spokesman for Valero told CNBC. He added that the company now processes about 50 percent light sweet crude, up from 1/3 just five years ago.

“Valero’s Gulf Coast refineries have stopped importing light sweet crude internationally because there is so much available domestically,” he added.

Shale oil

US takes the crude crown

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The USA is now the world’s largest oil and natural gas liquids producer.

US crude oil and natural gas liquids production surpassed all other countries, with daily output exceeding 11 million barrels during the first five months of this year.

Texas and North Dakota lead the way

The IEA has reported US production of 8.4 million barrels per day (bpd) of oil in April 2014, the highest monthly production volume in 27 years. Texas and North Dakota accounted for nearly half of this total.

Texas hit over 3.0 million bpd for the first time since the late 1970s, more than doubling production in the past three years. North Dakota production reached 1.0 million bpd for the first time in the state’s history, nearly tripling production over the last three years.

Since 2010, the combined output from North Dakota and Texas increased from 26% to 48% of total USA production. In contrast, the Gulf of Mexico’s share declined from 27% to 17%.

According to the IEA, gains in Texas crude oil production came primarily from unconventional tight oil and shale reservoirs in the Eagle Ford Shale in the Western Gulf Basin in West Texas. North Dakota’s increased production came primarily from the Bakken shale formation in the Williston Basin.

Since April 2011, the Eagle Ford has seen the largest average monthly production increase, exceeding 32 000 bpd, more than twice the 14 000 bpd increase in the Permian. Production from the Bakken increased 19 000 bpd on average each month over the same period.