The Second Of Two Big Stories Reported Last Week -- January 15, 2023

Disclaimer: All my posts are done quickly. There will be content and typographical errors. If anything on any of my posts is important to you, go to the source. If/when I find typographical / content errors, I will correct them. 

Long notes like these are particularly prone to having errors. If this is important to you, go to the source. I'm less interested in individual well production as I am in understanding the Bakken. 

Updates

January 23, 2023: see this note. 

Original Post 

Yesterday, I said there were two huge stories that broke on Friday, January 13, 2023. The first story was with regard to Apple and banking. The second story, below, is about XOM and its refinery expansion (technically, a new refinery).

From Beaumont Enterprise, an exclusive, September 4, 2022. Right on schedule. Only in Texas.

This is huge. Corroborates my thoughts about so much with regard to Canada, heavy oil, the Keystone XL, light oil, the Bakken, and the Permian.

From the linked article:

ExxonMobil will be bringing 40 to 60 new permanent jobs to the area when it's expansion opens in the first quarter of 2023. This is a $2 billion expansion.

The company's Beaumont Light Atmospheric Distillation Expansion, more commonly known as BLADE, is the United States' largest refinery expansion in a decade.

The expansion is set to increase the light crude refining capacity at the facility by more than 65%. According to the company, its Beaumont Refinery brought in 383,000 barrels per day in the second quarter of 2022. The BLADE project will bring in an extra 250,000 barrels a day.

"The Beaumont Refinery Expansion Project will expand light crude refining to bring greater supplies of transportation fuels to the market," the company said. "The expansion consists of adding a third crude unit within the Beaumont Refinery's existing Footprint -- increasing production of diesel fuel to help meet growing demand."

Refinery Manager Rozena Dendy said the expansion is like a mid-sized refinery all on its own.

The project will also be increasing ExxonMobil's U.S. Gulf Coast refining capacity by close to 17%.

Since construction began in 2019, ExxonMobil has hired 1,600 contractors onto its workforce.

Much more at the link.

I assume if construction began in 2019, thinking about the project began seven years earlier, perhaps as early as 2012. What was going on in 2012?

I figured the Keystone XL was dead as of 2012. Link here.

 Links from Friday, January 15, 2023:

• Abbott;
• XOM;
• light oil;
• Rory Johnston

There are so many facets to this story 

One facet that I, perhaps, love the most -- a two-parter:

• XOM's prescience with regard to the Keystone XL; and
• XOM's long view.

XOM's leadership, through the decades, has pride XOM on its long view. Ten years out, twenty yars out; thirty years.

But most incredibly, back in 2012, or thereabouts, XOM saw the future of the Permian and then saw the future of the Keystone XL. 

The  timeline, in fact, goes back much farther.

Somewhere in the late 1990s through the early 2000s, US oil companies (E&P, refiners) realized that US oil production was precipitously declining. 

US oil is light oil and US refineries, since the 1950s, had been optimized for light oil. But with US oil production declining, US refiners saw the future: heavy oil. Heavy oil: Saudi Arabia, western Canada, and Venezuela. 

In response, US refiners spent a huge amount of money to convert the gulf refineries to handle heavy oil.

Now to put some numbers into context.

Big Oil spent in excess of $6 billion (in 1990s dollars) -- this XOM expansion? Less than $2 billion.

When the XL was canceled -- something no sane oil person would have dreamed would have happened --- all of a sudden, US Big Oil was counting on Venezuela. And then Venezuela happened. The US was in deep trouble: access to heavy oil was was now limited to OPEC, not necessarily a good option. 

Despite all those challenges, Big Oil "found" enough heavy oil to meet the demands of the refiners.

And then the US shale revolution. The only problem. US shale (the Permian and the Bakken and everywheree else) was light oil. But having just spent $6 billion optimizing "light oil" refineries to "heavy oil" refineries, there was no stomach for converting the refineries again, and there was hope that a GOP president would re-instate the XL permit. Yes, but then Biden was elected. Back to square one.

Through all this, XOM saw the future. Access to heavy oil was going to continue being a challenge and the amount of light oil coming on line would be huge. Remember: when the price is right, US light oil is coming from a lot more plays than just the Permian and the Bakken.

So, XOM went first: expanded and optimized the expansion for light oil.

I'll stop there, but there is much more that could be said.

One question: what refiner will be second to follow XOM?

But this is huge.

It comes just as Biden opens up access to Venezuela's heavy oil. 

By the way, of all the social media links above, the most informative and the most important is an excellent thread by Peter Zeihan.

*****************************
On The Importance Of Knowing How To Budget -- President Barack Obama

By the way, knowing that most folks won't click on that link, here's what else was posted that date:

As long as we are doing flashbacks, here's an April Fool's day flashback, from April 1, 2013:

I can't make this stuff up. President Obama proclaims the month of April to be the month to teach young people how to budget responsibly:

President Barack Obama, who has increased the national debt by $53,377 per household, has proclaimed April “National Financial Capability Month,” during which his administration will do things such as teach young people “how to budget responsibly."

“I call upon all Americans to observe this month with programs and activities to improve their understanding of financial principles and practices,” Obama said in an official proclamation.