Connecting Dots Quickly -- Reversing Pipeline Flows

This morning I posted the link to today's RBN Energy article noting that the expected narrowing of the Brent/WTI spread would be evident by now with the reversal of the Seaway pipeline, that runs between the Gulf Coast and Cushing, OK.

The reversal of the Seaway was completed, but the expansion from 150,000 bbls/d to 400,000 bbls/d was delayed until 4Q13 (although there are hints that the expansion may be back on track sooner).

It now appears that even with the Seaway reversal, the glut will persist. Remember: there are at least three major fields now in production contributing to the glut: the Permian (west Texas), the Eagle Ford (south/southeast Texas), and the Bakken. Not far behind (?): the Niobrara and the Mississippi Lime.

The operators of the nation's largest pipeline, the Capline, running from Louisiana to Illinois, have announced they will reverse the flow of this pipeline. They had originally planned not to reverse the flow when it was announced the flow of the Seaway pipeline would be reversed.

Today, at Bloomberg:

• WTI: $96
• Brent: $115

Spread: $19 -- about as high as it's been in recent history

The Bakken/WTI spread at Clearbrook, MN, has narrowed from $3.25 to $3.15. [WTI at $96, means Bakken at Clearbrook is about $93.]

I tried connecting the decision to reverse the flow of the Capline (this is a reversal in itself) with the reality that the Keystone XL is not likely to be approved, but I can't connect the two. But as long as I've mentioned it, I might as well complete the thought: killing the Keystone XL will be seen as a plus for the domestic US oil industry. There is so much oil coming out of the mid-continent, any more oil from Canada just couldn't be handled right now. At least that's my two cents worth. So, why are we still importing oil if there is so much oil being produced by the US? Part of the reason has to do with the type of oil US refineries are configured to use. Again, I'm way beyond my understanding of the oil industry, but that's my two cents worth. 

Operators Will Reverse Flow of the Nation's Largest Pipeline

This is really, really cool (for me personally -- connecting dots of earlier posts).

First, this link, "diluent central", posted September 14, 2012:

Capline:

• tracks the Mississippi River from Louisiana to Patoka, IL
• largest continental US pipeline
• at 1/6th capacity; only pumping every other day due to glut from north
• if Utica shale pans out; under-utilization even worse
• shipping diluent back to Canada from as far away as the Eagle Ford
• Eagle Ford --> St James --> Capline --> Southern Lights (Enbridge)--> Alberta (Rusty Braziel, RBN Energy)
• considering increasing the flow of diluent to fill its empty pipes
• Capline had planned to reverse its north-south pipeline to south-north, BUT a reversal less likely now that Enbridge/EPD said they would double capacity of the competing Seaway Pipeline

That was then: the decision to reverse the flow of the nation's largest pipeline is now.

Now, over the weekend: the decision to reverse the flow:

Independent oil refiner and marketer Marathon Petroleum Corporation (MPC) is planning to reverse the Capline pipeline to transport oil from the Midwest to the Gulf Coast refining belt. The reversal will help in draining the excess crude oil from increased drilling in the Midcontinent.

The 1.2 million barrel-a-day Capline pipeline is currently operated by Shell Pipeline, a subsidiary of Royal Dutch Shell plc (RDS.A). Marathon owns 32.6% of the same and at present, the pipeline delivers crude oil from Louisiana to Illinois.

Marathon is expected to start operating the 630-mile pipeline from Sep 2013. Other details of the deal are yet to be disclosed by the company.

This will be the second key pipeline reversal following the Seaway pipeline. Enbridge Inc. and Enterprise Products Partners have plans to convert the Seaway pipeline in a month and increase its capacity to 400,000 barrels a day by 2013.

The second linked article is dated February 1, 2013. I thought the Seaway had already been converted; but a delay in expanding the capacity to 400,000 bbls to 4Q13. Time will tell.

Peak Oil? What Peak Oil? NY Times Article on Monterey Shale Oil in California

Link here to the New York Times.

Comprising two-thirds of the United States’s total estimated shale oil reserves and covering 1,750 square miles from Southern to Central California, the Monterey Shale could turn California into the nation’s top oil-producing state and yield the kind of riches that far smaller shale oil deposits have showered on North Dakota and Texas.

For decades, oilmen have been unable to extricate the Monterey Shale’s crude because of its complex geological formation, which makes extraction quite expensive. But as the oil industry’s technological advances succeed in unlocking oil from increasingly difficult locations, there is heady talk that California could be in store for a new oil boom.

Established companies are expanding into the Monterey Shale, while newcomers are opening offices in Bakersfield, the capital of California’s oil industry, about 40 miles east of here. With oil prices remaining high, landmen are buying up leases on federal land, sometimes bidding more than a thousand dollars an acre in auctions that used to fetch the minimum of $2. 

Note that opening line: the Monterey Shale comprises two-thirds of the United States' total estimated shale oil reserves.  

Peak oil? What peak oil? 

A huge "thank you" to a reader for alerting me to the article. 

Nothing To Do With The Bakken -- America's Youngest Female Billionaire: 30 Years Old ...

... owning a piece of my favorite hamburger restaurant -- at least some days it is my favorite. Five Guys and Whataburger round out the top three.

Link here at Bloomberg.

Lunchtime at the flagship In-N-Out Burger restaurant in Baldwin Park, California, is a study in efficiency. As the order line swells, smiling workers swoop in to operate empty cash registers. Another staffer cleans tables, asking customers if they’re enjoying their hamburger. Outside, a woman armed with a hand-held ordering machine speeds up the drive-through line. 

Such service has helped In-N-Out create a rabid fan base -- and make Lynsi Torres, the chain’s 30-year-old owner and president, one of the youngest female billionaires on Earth. New store openings often resemble product releases from Apple Inc. (AAPL), with customers lined up hours in advance. City officials plead with the Irvine, California-based company to open restaurants in their municipalities. 

That is an absolutely accurate description. When it gets busy at In-N-Out just up the street from Miss Daisy''s family home in San Pedro, CA, a staffer is outside walking along the cars in the drive-through taking orders on her hand-held operating machine. There are days when the walk-in line stretches out the door.

At this particular restaurant, it is not unusual for the manager to come out and talk to guests when things slow down; that may be true at all the restaurants.

30 years old. America's youngest female billionaire. What a great country.  She was in the right place at the right time: a granddaughter of the founder when she became the sole surviving heir. And she loves drag racing.

Monday Morning

Production data for wells coming off the confidential list over the weekend and today have been posted.

I will be off the net for a short period of time while I ride my bike through the snow to get to the coffee shop.  Beautiful day out there with about 0.5" of new snow.

Remember the virus alert posted over the weekend.

RBN Energy: Brent/WTI spread didn't narrow all that much despite reversal of the Seaway. Apparently there are some operational issues affecting the full expansion; issues may not be resolved until 4Q13. Crude is "off a dollar" in pre-market trading.

CLR issued a press release overnight announcing a webcast. As a reminder, in that press release:
In October 2012 , the Company announced a new five-year plan to triple production and proved reserves by year-end 2017.

Maps with location of rigs in North Dakota and the United States can be found at "Data Links." Overnight "anon 1" sent another link for Nomac Drilling which has been added at that link, or go here directly.

Low rates are forcing companies to pour money into pension plans to shore them up.

Gun-related deaths on a rise in Massachusetts; a state with strict gun controls; Boston Globe;

WSJ Links

Section R (Retirement): investing, stocks, bonds, taxes; did not read.

Section C (Money & Investing): interest in investment clubs dwindles

Section B (Marketplace):
Tech titans clash in "cloud"; this is interesting phenomenon; yesterday Amazon let me know that all the CDs I had purchased from them over the years were now available in the "cloud" for free; that's really quite incredible when you think about it

Chrysler, Taco Bell win in ad bowl; Oreo's ad -- a fight breaking out in a library -- was among the favorites; one ad executive called the Oreo ad an 'epic' commercial;

Daimler boosts investment in China

Sports page: the night the lights went out in the Super Bowl

Section A:

Op-ed: Chuck Hagel's defenseless performance -- but he will be approved anyway

Op-ed: Ed Koch -- entertaining but no reformer; he saved NYC from an immediate fiscal crisis, but mortgaged its long-term future to public unions.

********************

Something is happening here, buy you don't know what it is:

Ballad of a Thin Man, Bob Dylan Classic Dylan