Excess Crude Oil Storage Along The Gulf Coast? -- RBN Energy, August 27, 2015

Active rigs:

	8/27/2015	08/27/2014	08/27/2013	08/27/2012	08/27/2011
Active Rigs	76	194	186	190	200

RBN Energy: Houston area crude oil storage under-utilized despite regional record levels. Archived.
Close analysis of Houston area crude storage indicates it is only 52% utilized today even as regional crude inventories have reached record levels. Meeting refinery operational needs appears to be the main use of area storage – rather than speculative gains from buying today’s cheap oil to store and sell later. Today we continue our analysis of Houston area refinery infrastructure.

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Very Long-Term Readers Know My Feelings On Flaring

The Bismarck Tribune reports that a proposed delay of the flaring rules in North Dakota spurs debate. Well, duh.

A decision to push back a Jan. 1 benchmark for the reduction of natural gas flaring was delayed Wednesday by the North Dakota Industrial Commission.

Lynn Helms, director of the North Dakota Department of Mineral Resources, cited industry concerns over being able to meet the 15 percent target as part of regulations put in place by the commission just over a year ago. His recommendation called for extending the benchmark to Oct. 1, 2016. A flaring task force that includes industry officials had asked for a delay of two years.

The three-member commission will consider the matter at its Sept. 17 meeting, with NDIC chairman Gov. Jack Dalrymple saying they need to see documentation from industry laying out a clear case for the need to delay.

My suggestion: just ban drilling in North Dakota until we sort this all out. A lot of operators are probably "walking dead" anyway. Years ago, when breaking up with a close friend, she said we could either pull the band-aid off quickly or pull it off very, very slowly.  Seems like North Dakota is about at that same point in its relationship with the oil and gas industry. It's been real, it's been fun, but it's not been real fun.

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CBB

Not a bit unexpected as more pipelines come on-line: CBB declining:

The inland US crude-by-barge market was a promising one at the start of 2014. Kirby, the leading operator in the field, announced it would add 29 barges to its inland fleet by the end of 2014, and Kirby CEO David Grzebinski said as late as July of that year that the waterborne transportation markets had “strong fundamentals,” and a “good long-term outlook,” with inland contract pricing on the rise.

But the rapid crude price decline has caused long-term inland crude-by-barge contract prices to stall and renewals to wane.

A second price dive earlier this year pummeled market confidence in an early-2016 crude recovery and sent the contracts into a slide.

On top of all that, barged crude volumes have faced deep cuts since their 2013 peak after a slew of pipeline projects eased midstream congestion.

Obama's Clean Power Plan. This is a heck of a good story; great news. I'm not sure if I will do a stand-alone post on this one or not but this is filled with positive story lines. Put me a good mood all evening. Obama's Clean Power Plan will mean huge opportunities for North Dakota.

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Wind

Quick! What's the most interesting thing about this graph?

From the EIA:

The domestic market for distributed wind turbines has weakened since the record capacity additions in 2012. Last year's installations of mid-size and small wind turbines were the lowest in a decade. Relatively low electricity prices, competition from other distributed energy sources, and relatively high permitting and other nonmaterial costs have presented challenges to the distributed wind market in the United States.

And for the intermittent energy advocates, wind blows away solar in terms of acceptability across the US.

Wednesday, July 15, 2015

Active rigs:

	7/15/2015	07/15/2014	07/15/2013	07/15/2012	07/15/2011
Active Rigs	73	194	186	215	178

RBN Energy: Growing Crude-by-Barge Traffic on the Ohio River.

While Energy Information Administration (EIA) estimates of crude-by-barge traffic between the Midwest and the Gulf Coast have fallen sharply in the past 18 months, shipments down the Ohio River to Texas and Louisiana refineries have increased threefold – peaking at just under 70 Mb/d in May 2015. Growing barge shipments have been accompanied by midstream investment in barge dock facilities – especially in Ohio. Today we discuss increased shipments of ultra light crude condensate to Gulf Coast refineries on the Ohio River.

This series updates previous RBN Energy analysis of crude movements by barge – along the U.S. inland waterway system that includes the Mississippi River system and the Gulf Intracoastal Waterway (GIWW) between Texas and Louisiana. In Episode 1 we first recapped previous RBN coverage of the barge market - describing the 10 - 30 MBbl tank barges that are pushed up and down the river system in unit tows of 2-3 barges by “towboats”. We described how the use of barges to carry crude oil has increased significantly since U.S. crude production from shale took off in 2011. The nations crude pipeline distribution system became congested – particularly in the Midwest where new shale crude from North Dakota competed with oil sands crude from Canada to get to refineries in coastal locations. To bypass this congestion shippers turned to alternatives such as rail and/or inland barges to get their crude to market destinations where prices were higher. In many cases this “workaround” involved loading crude onto rail tank cars and then transshipping it onto barges to make the final leg of the journey to Gulf Coast refineries via the Mississippi River. Crude barge traffic between the Midwest and the Gulf Coast increased 10 fold between 2010 and 2013 – peaking in October 2013 at 158 Mb/d. Since then crude by barge volumes have fallen off just as rapidly – in response to new pipelines coming online to provide a more efficient route to market.

At the same time, crude price differentials that previously justified the higher cost of barge transport (subject to Jones Act regulations that increase shipping costs) narrowed during 2013 and have not recovered since. As a result barge traffic on the Midwest – Gulf Coast route was down to 27 Mb/d - 80% below its peak – by April 2015. In this episode we look at growing barge traffic on the Ohio River carrying lease condensate (categorized by EIA as crude oil) from the Ohio Utica.

The data tells us that total crude/condensate shipments increased steadily on the Ohio River from 3.5 Mb/d in January 2014 to 20 Mb/d in December 2014 – averaging 13 Mb/d during 2014. During the first half of 2015, however, average crude by barge movements increased threefold to 39 Mb/d – peaking at nearly 70 Mb/d in May. You can also see from the chart that the vast majority of these shipments were from West Virginia to Louisiana (light blue) and from Pennsylvania to Louisiana (purple). These two combinations represented 84% of the shipments by volume during 2014 – increasing to 92% in the first half of 2015. And the trend in this data is quite different to what we saw for Midwest (PADD II) to Gulf Coast (PADD III) barge shipments in Episode 1 - where volumes peaked in October 2013 and have been falling ever since as new pipeline capacity came online to compete with more expensive (rail and) barge transportation. Also of note – the peak shipments on the Ohio River this May represent just under half of the peak traffic volume seen between the Midwest and the Gulf Coast (158 Mb/d).

Bakken Oil To Port of Vancouver USA

Updates

Later, 7;38 pm: This post explains why they need to ship Bakken oil to California in ocean-going tankers rather than railing it there directly.  This will come into play if there's a oil-tanker event spilling oil into the Pacific Ocean.

 

Original Post

A reader sent me this story overnight, thank you. The reader who sent me the story below noted that Bakken oil would be railed to Vancouver, and then placed on ocean-going tankers for California, Washington, and Alaska. Because of the regulatory issues railing directly to California, it is easier/cheaper/whatever to go via Vancouver and then down to California.

The Columbian is reporting:

North Dakota's oil boom is bringing crude oil — and jobs — to the Port of Vancouver.

Tesoro Corporation and Savage Companies said Monday they've launched a joint venture to build and operate facilities to store, load and unload crude oil at the port. The crude oil would be shipped to the port by rail from the Bakken oil formation in North Dakota. Then it would be hauled by ship to refineries in Washington, California and Alaska for domestic purposes, including gasoline for cars and trucks.

The companies would own the facilities, designed to initially handle 120,000 barrels per day with the potential to expand to 280,000. However, Tesoro and Savage need to secure a ground lease with the port, which initially is expected to be for 10 years. The public will have a chance to weigh in on the matter: The port's Board of Commissioners is expected to decide a lease deal by June. Likewise, a public vetting will occur before Washington state's Energy Facility Site Evaluation Council, a one-stop place for evaluating requests for permits to build major energy facilities.

Williston Wire Headlines; Crude-By-Rail-Barge-Project Planned

Headlies only; no links. It is easy to subscribe to the Williston Wire.

• The first story is a biggy. Williston Holding Company has purchased four of the most well-known restaurants in Williston, and four that my dad and I used to frequent often:

Trapper's Kettle Restaurant
Gramma Sharon's Family Restaurant
J Dub's Bar & Grill
Williston Brewing Club in leased space in the El Rancho hotel

• Heidi Heitkam (US Senator) says she will influence public policy to help with the housing problem in the Bakken oil patch. Watch your wallets.
• Williston episode of "American Journey" on Headline News was show's highest rated
• Renae Mitchell is making a living photographing oil wells in the Bakken
• High-density drilling may re-define Bakken's potential
• Drilling more with fewer rigs
• Takeaway in the Bakken is sufficient for the next two years. I've heard that story before
• Indigo Resources Ltd will build a rail-to-barge facility in Osceola, Arkansas, to move Bakken and Canadian crude to the Gulf Coast; a 610-acre site on the Mississippi River with 3,000 feet of river frontage, three sets of manifolds, five rail loops, and 16 miles of track with room for 100+ car unit trains; the site has direct rail access to Minot and Tioga, with shipments moving as much as three times faster than long rail hauls to the Gulf Coast
• The Casper Star Tribune also reports on Harold Hamm's new pipeline to Cushing; previously reported
• North Dakota passes two laws aimed at eliminating unnecessary bureaucratic delay for pipeline projects; sounds like the same kind of sound thinking that created the Bank of North Dakota decades ago
• McKenzie County's landfill was supposed to last 50 years. With the boom, the 50-year life expectancy for the landfill went to .... drum roll .... 2 years. No typo. From 50 years to 2 years. I guess that's one way to define a boom. Maybe The Atlantic Monthly will do another story
• Crosby city residents overwhelmingly approved a one percent sales tax to help St Luke's Hospital during a time of transition, to include assuming ownership of the local nursing home
• Many critical access hospitals in North Dakota losing money, including McKenzie County
• Wildcat Pizzeria to open in Dickinson
• The Oilfield Cowboy has spent a lot of time around oilfields in Louisiana and Oklahoma but says he has never seen a boomtown like Williston
• The Beatles will be performing tonight in Williston. Oh-oh, strike that. The Abbey Road Band, a four-man live tribute band will be performing in Williston tonight. The Beatles can't perform. Paul McCartney had a conflicting engagement.

Video, Story of Bakken Crude Oil Moving To Washington State

Yesterday I linked a Platts' story that a reader sent me about Bakken oil reaching the west coast.

Today, a reader alerted me to a great link at King5.com: Oil boom bringing trainloads of crude oil through Washington.

An oil boom in the Midwest is laying the tracks for a major transportation hub in Washington. Crude is coming here by rail, pipeline and barge, and state agencies have a hard time keeping up with the pace.

Activists have been worried about what proposed coal terminals would do to rail traffic in Washington state, but little attention has been paid to plans to transport.

Washington State Ecology officials have been planning to publish a map showing increasing oil maps across the state. The problem is the new proposals are popping up so quickly they have to keep updating it. Crude oil is already rolling down rail lines through Tacoma and Seattle and more is on the way.

The site at the link has a short video clip.



The article and the caption at the movie suggest that the Washington state officials are having trouble keeping up with all the activity: port and rail. Can you imagine a much smaller state (in terms of population and much less infrastructure) having a whole lot more to deal with: permitting, drilling, fracking, rail transportation, pipelines, the reservation, BLM/the feds, airlines/airports, housing, labor or lack thereof, $17 starting pay for Wal-Mart, and the list goes on and on and on. And here the folks in Washington State are having trouble keeping up with two small aspects: rail, which is pretty much already in place, and ports, ditto.

Bakken Crude Oil by Barge

I first reported this June 29, 2012.

Jeff sent me an update, at this link, from Fox Business:

Barge operator Kirby Corp. (KEX) said Thursday that it is shipping crude from the Bakken Shale to refiners in Louisiana through the Mississippi River.

The Houston-based company is believed to be the first barge operator to use America's most famous river as a highway for oil from the land-locked Bakken, ...

Kirby during last weekend loaded on its barges at St. Louis a unit-train of Bakken oil that had arrived by rail. The barges take a week to travel down the Mississippi River to bring the oil to the Baton Rouge, LA, area, said company spokesman Steve Holcomb.

Go to the link for the full story.