I had completely forgotten this quote: "We can't just drill our way to lower gasoline prices." -- December, 2014.
[Update, January 3, 2016, 6:10 a.m.: LOL.]
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This time we turn to the future of rail shipments to the West Coast from North Dakota.
This data comes from Energy Information Administration (EIA) monthly crude rail movement estimates that began publishing in April 2015. Because the EIA does not break this data down within PADDs we assume that it largely covers CBR movements between North Dakota and West Coast refineries located in Washington State and California. This assumption is based on the location of rail loading terminals in PADD II (most are in North Dakota) and rail unloading terminals on the West Coast that are mostly linked to refineries in Washington and California.
Having made that assumption we further separated out CBR shipments to California from North Dakota that are reported separately by the California Energy Commission (CEC).
The CBR shipments to Washington are simply the EIA PADD II to PADD V totals minus California. Shipments to California are a fraction of the total – just 2-5 Mb/d in 2013 and 2014 and (according to CEC) have been zero since November 2014. So West Coast CBR from North Dakota is almost all headed to Washington State. The yellow line on the chart against the right axis is the ANS premium to WTI crude. ANS – Alaska North Slope - is the West Coast benchmark crude and West Texas Intermediate – WTI crude is the Midwest benchmark.
Nevertheless – it is clear that increasing CBR shipments to the West Coast in 2014 and continued average shipments in 2015 of 140 Mb/d were not driven by Alaska North Slope (ANS) premiums – because the latter were dismal compared to 2012.
In fact it seems clear that Bakken CBR shipments to Washington State have been and continue to be dominated by refinery demand.
There are 5 refineries in Washington State with combined capacity of 647 Mb/d. These refineries mostly process ANS crude shipped down from Valdez, AK, together with imported waterborne crude and Canadian crude shipped by pipeline to Vancouver.
Since 2012 – starting with the Tesoro Anacortes refinery they have each built or planned to build CBR unloading terminals that are designed to receive Bakken crude from North Dakota.
The only refinery that has yet to bring a CBR terminal online is Shell Puget Sound that had its permit for a 65 Mb/d rail terminal referred for an environmental impact study in February 2015 – likely delaying construction by at least another year (see update below).
The four rail terminals at the other refineries have so far been the primary destination of North Dakota CBR to the West Coast – with their combined capacity being responsible for the majority of the 140 Mb/d of rail shipments from North Dakota this year.
And although the refiner’s initial motivation was clearly to access cheaper Bakken crude they are also interested in securing domestic supplies to supplement declining ANS production.
Just as we saw with East Coast refiners they have made investments in CBR terminals and rail tank cars and are unlikely to give up using rail until an alternative mode of transport (e.g. pipeline) emerges (if ever).The status of the Shell Puget Sound Environmental Impact Study:
The co-leads reviewed all comments received and have issued a scoping report that summarizes all comments. Preparation of a draft EIS is under way, with publication and public review, comment and hearings expected in the fall of 2016.The most recent EIA energy analysis of California was a year ago. It will be updated January 21, 2016. The last EIA analysis (2015; most recent data, 2014):
California ranks third in the nation in petroleum refining capacity and accounts for more than one-tenth of the total U.S. capacity.From CA.gov:
A network of crude oil pipelines connects the state's oil production to the refining centers located in the Central Valley, Los Angeles, and the San Francisco Bay area.
California refiners also process large volumes of Alaskan and foreign crude oil received at ports in Los Angeles, Long Beach, and the Bay Area. Crude oil production in California and Alaska has declined, and California refineries have become increasingly dependent on imports to meet the state's needs.36,37 Led by Saudi Arabia, Iraq, and Ecuador, foreign suppliers now provide more than half of the crude oil refined in California.
Additional crude oil supplies arrive by rail from several western states, particularly North Dakota, New Mexico, Utah, and Wyoming.
36 to 44 degrees API. The quality of this oil is excellent, almost identical to WTI. The benchmark crude oil is West Texas Intermediate, which is 40 degrees API sweet crude. It is the benchmark because it requires the least amount of processing in a modern refinery to make the most valuable products, unleaded gasoline and diesel fuel.North Dakota Spearfish: 36°
Crude oil found in Iraq varies significantly in quality, with API gravities generally ranging from 22° (heavy) to 35° (medium - light). Over 70% of national oil reserves are below 28° API and the International Energy Agency (IEA) predicted in its 2012 report on Iraq that future production is likely to include a larger share of heavier crudes. However some of the crudes produced at the Taq Taq field in the norther semi-autonomous Kurdistan region are as light as 48° API, dubbed by Reuters as "champagne crude".California: heavy oil; pdf here -- old data, from 2004, but type of oil probably has not changed
Seeks low-sulphur, light oil, September 1, 2015:Venezuela: heavy oil, similar to Canadian oil sands.
Net crude exporter Petroecuador issued a tender to import 30 million barrels of light sweet crude over the course of a year in an attempt to maximize diesel and gasoline production when its Esmeraldas refinery comes back online in the fourth quarter, market sources said Tuesday.
Petroecuador is seeking 30 million barrels of low sulfur crude oil with an API gravity of 28 degrees to be delivered in a one-year period, according to a tender issued late Monday.
The state-owned oil company is seeking the barrels "in order to optimize the Esmeraldas refinery operations, once the revamping has been complete," the tender said.