Intermittent Blogging This Morning -- September 3, 2015

Running some errands the morning; not sure where / when I will have wi-fi?

Active rigs:

	9/3/2015	09/03/2014	09/03/2013	09/03/2012	09/03/2011
Active Rigs	75	193	186	192	198

RBN Energy: update on Houston crude oil storage.

Even as Houston area crude oil storage – at refineries and commercial terminals – remains just half utilized according to data from Genscape, midstream operators are busy building more tanks. About 7 MMBbl of storage is under construction now and plans have been announced this year to build another 11 MMBbl. Today we detail plans to expand crude storage in the Houston area.

The First Episode in this series reviewed the evolving crude supply demand balance into the Houston refining region that has 9 refineries and two new 50 Mb/d condensate splitters that are processing an estimated 2.4 MMb/d of crude between them. Since 2012 a flood of new crude has begun to arrive in the Houston area by pipeline – replacing overseas imports. At the moment incoming crude supplies arriving by pipeline and barge roughly balance with refinery demand. However - incoming pipeline capacity is less than 50% utilized today even as more than 1 MMb/d of new pipes are expected online by early 2016 - suggesting that a lot more incoming crude is expecting to navigate the Houston area in the future (or that the incoming infrastructure is being overbuilt).

Episode 2 reviewed logistic challenges in the Houston area arising from crude quality differences between traditional imports that are heavy and medium grades and new domestic production that has been predominantly light crude or ultra light condensate. Existing refineries were built to process heavier crudes and can only handle so much lighter crude without investment and reconfiguration. That means heavier waterborne imports are still needed – although they are being slowly replaced by heavy crude coming by pipeline from Western Canada. At the same time changing interpretations of Bureau of Industry and Security (BIS) regulations governing the export of crude now allow exports of lightly processed condensate that has to be segregated – complicating pipeline logistics.

Episode 3 looked at the limited ways that crude coming into Houston by pipeline can currently bypass area congestion to get to refineries in Port Arthur/Beaumont or further along the Gulf Coast in Lake Charles and St. James, LA. The new Enterprise Rancho II pipeline will relieve some of that congestion but there is still a constraint east of Port Arthur/Beaumont. In Episode 4 we took a closer look at Houston area crude storage – finding it only 52% utilized at present even as storage in the wider Gulf Coast region has been filling up in response to a contango market structure. This time we detail midstream plans to add even more crude storage in Houston.