Wednesday, March 14, 2012

Trends -- The Impact of the Bakken -- Further Impact of the President Killing the Keystone

Link here.

And more here.

This is really quite incredible -- the impact of four counties (Williams, Mountrail, McKenzie, and Dunn) in fly-over country.

Unless I'm reading one of the linked stories incorrectly, it looks like Valero won't be adding another coker in Louisiana because of the UNCERTAINTY of the KEYSTONE XL. The CEO is not convinced that the pipeline will be finished any time soon, obviously.

Every day, the decision to kill the Keystone XL 1.0 looks more and more irresponsible and ill-conceived.

Meanwhile, purging of the Seaway is complete, one more step in process of reversing the flow.

Back to the earlier links.

First, the  impact on the Bakken leading to increased sweet oil imports in the Gulf:
Increasing U.S. onshore shale oil output likely will displace light sweetcrude imports to the U.S. Gulf Coast by 2015, Valero Corp Chief Executive Bill Klesse said on Tuesday. The increased sweet crude going to Gulf Coast refineries also is expected to narrow heavy crude differentials to thepoint that Valero aims to shelve plans to add a coker unit toits 292,000 barrel-per-day refinery in Port Arthur, Texas,because it won't be economical, Klesse said.
Four years ago we thought we want to build cokers to do allof this but today you're seeing much more light sweet crude,"said Klesse, head of the largest U.S. independent refiner,during a break at the annual meeting of the American Fuel and Petrochemical Manufacturers in San Diego, California.
"In another two to three years, we are saying like 2014 to 2015, there will be no light sweet crude imports into the U.S. Gulf Coast. It's about a million barrels today," he said.

In North Dakota alone, drilling in the Bakken shale prospectdoubled the state's crude output in the last two years to546,050 barrels per day (bpd). That will narrow the discount of heavy crude compared tolight, so much so that Valero expects to let its permit for a $500 million coker project at the Port Arthur plant expire.He said a big factor in the equation is uncertainty as to when TransCanada's proposed $7 billion Keystone XLpipeline can move forward to transport Canadian heavy crude from Alberta to U.S. Gulf Coast refineries with coker capability to process it -- like several of Valero's plants. 
Pressure on Canadian oil sands and  Bakken sweet:
Bargain-basement discounts on Canadian crude are more than just a short-term irritant for producers as surging supplies and a limited U.S. Midwest refining market threaten to cut
industry-wide revenues by as much C$18 billion ($18 billion) a year, an analyst said on Monday.
Wide light and heavy crude price spreads plaguing the Canadian market since the start of the year could expand even more in the coming two months as numerous refineries begin
maintenance, and the end of that work and start of a reversed pipeline to Texas from Oklahoma won't bring permanent relief to fundamental problems.
He said the situation could last beyond 2013, when the Keystone XL southern portion starts to drain large volumes of>supply from the Cushing, Oklahoma, storage hub and moves it toTexas refineries. The northern, cross-border portion of Keystone XL and or newpipeline capacity to Canada's West Coast are not expected tostart up until the second half of the decade.Another factor that may ease the situation could be a reversal of Royal Dutch Shell's 1.2 million barrel a day Capline pipeline to Illinois from the Gulf Coast, Potter said.
One source told Reuters on Monday that the concept i sunder discussion.
Canadian synthetic crude, derived from the Alberta oil sands, and Bakken light oil, from North Dakota shale deposits, are selling for around $16 a barrel and more under U.S. benchmark West Texas Intermediate crude and $34 under the international Brent marker.
Some great investment opportunities, if one thinks about it.


  1. Russia wants to ship LNG to India and China. Russia wants a price based on oil.

    India and China are planning to buy LNG from the US, based on US nat gas prices.

    The only question is how much export LNG will be allowed.

    Think about this: Would you rather have Russia get $50,000,000,000/year, for 20 years or the US?

    The implications are staggering. $ and defense and geopolitics.

    anon 1

    1. I can only assume the price of natural gas will "melt upward" eventually. And under the right circumstances, one could even imagine an unexpected sudden rise.

  2. More green waste. So how is this investment working for you DOE and Massachusetts?

    1. I actually posted a story on Evergreen Solar a few weeks ago; thank you for the update. Another DOE debacle.

  3. After reading the RigZone characterization of the latest frac study by the Energy Institute at the University of Texas at Austin, as per your link a few weeks back, I tracked down the report at the Energy Institute. After reading the report I noticed a link at the bottom of their front page to an article entitled How (and Why) the Republicans Killed the Keystone XL Pipeline. It turned out to be the most balanced brief description of events to date that I've read. It has rolled off their front page but is within their News section. I do take issue with the use of the word killed regardless of who's accused of the killing because it's a dishonest characterization of events to date. The more accurate term would be "further delayed".


    1. First issue: 1. TransCanada has taken the Keystone XL off the table. Whatever word other folks want to use, that's fine with me, but the Keystone XL is dead.

      2. My understanding is that TransCanada will submit a new application for a new route after the election. Most likely they will call it Keystone XL but it will be a new route based on comments by TransCanada.

      Second issue:
      1. The buck stops in the Oval Office. The president could have approved it.

      2. The route has been studied longer than it took the US to enter and conclude WWII.

      Third issue:

      !. To "defer" something suggests that something will happen again.

      2. Based on public statements by TransCanada, they have no plans to have the US reconsider Keystone XL 1.0. They've taken it off the table (see issue #1 above). If that seems to be splitting hairs, so be it. But for sake of discussion I will give you that. Then we have the last point.

      3. It is my understanding that TransCanada has said they will reapply for "something" after the election, but have not yet done so (I could be wrong).

      If there is no application waiting to be reviewed, then we are back to square one.

      Although it is 99.99% likely that TransCanada will submit a new application for "a" Keystone XL, there is no guarantee. If TransCanada does not submit an application for Keystone XL 2.0 (not Keystone XL 1.0), "deferral" becomes a non-issue.

      It is just as likely that TransCanada will see that there are other options, and Keystone XL 2.0 won't be needed at all.

      Bottom line: without pointing fingers: TransCanada XL 1.0 is dead. TransCanada has taken it off the table.

    2. How about the immediate termination of 20,000 direct shovel ready jobs that required NO federal government outlays? Does that work for you?

      It is defiantly a better outcome than any of the so called jobs created by this administration.

    3. As noted, the killing of Keystone XL 1.0 is appearing to be more irresponsible and ill-conceived every day.


    1. Good catch. I may have to start a page devoted just to faux-environemental McGuffins starting with Keystone XL and Sabine Pass. Something tells me the US Senate is going to halt all such activity (Sabine Pass activity) until the issue can be fully studied.

    2. I think Oneok's cryogenics gas plant west of Williston will prove to be a smart move. Liquefy the natural gas (methane) in North Dakota and move it by rail to the west coast and ship it to the Pacific rim nations.

    3. I agree; this was huge; ONEOK saw a huge opportunity and took advantage of it. I'm impressed how fast ONEOK moved; got it completed.

  5. Wow, Study after study. Have we not learned anything! More review.... Meanwhile! Everyone suffers...

    1. As noted, in the District of Columbia, where 1.4% of annual income is spent on gasoline, there is plenty of time to study the high price of gasoline and diesel. In fly-over country, such as North Dakota, the percent of annual income spent on gasoline is 10%.