Wednesday, December 23, 2015

Active rigs:

	12/23/2015	12/23/2014	12/23/2013	12/23/2012	12/23/2011
Active Rigs	65	172	189	187	197

RBN Energy: congestion on the Colonial refined products pipeline.

While recent analysis has raised concerns crude oil pipelines are running half empty the opposite is true for many of the nations’ refined product distribution pipes. Take the huge Colonial Pipeline system that delivers as much as 2.7 MMb/d of refined products from Gulf Coast refineries to destinations up the East Coast as far as New York. The southern stretch of the pipeline from Pasadena near Houston to Greensboro, NC has been running full since 2012 - meaning that shipper volumes are subject to rationing or apportionment. Today we start a two-part series explaining why the Colonial pipeline is so congested and how it operates.

We previously detailed the woes of East Coast refineries back in June of 2012 when plants had been shuttered due to poor refining margins. Since then refinery fortunes in the region that the Energy Information Administration (EIA) calls Petroleum Administration for Defense District (PADD) I - have recovered somewhat – starting with the “rescue” purchase by Philadelphia Energy Solutions of a former Sunoco refinery in Philadelphia (see Beginning To See The Light). This refinery renaissance was in large part due to processing cheaper domestic crude railed from the Bakken instead of more expensive imports. In the case of two refineries in Delaware City and Paulsboro, NJ owned by PBF Energy – the revival formula also involved railing in heavy crude from Canada (see Masterpiece Refining). But despite the fact that refiners have done well in the shale era because of access to cheaper “advantaged” crudes (see Living With A Material Surge), East Coast refineries still don’t produce enough refined product to meet local demand – particularly heating oil during the peak winter season (see New York State of Contango) and gasoline in the summer. The shortfall is made up by a combination of shipments from the nation’s largest refining center – the Gulf Coast (PADD III - which hosts just over 50% of U.S. refinery capacity – 9.4 MMb/d) and imports, mostly from overseas.