Gulf Oil & Gas Product - Elite Torrent

The Changing Landscape of North American Gulf Oil & Gas Product Oil Markets After decades of decline, crude oil production in the United States has recently been increasing rapidly1
. Horizontal drilling and multistage hydraulic fracturing are now utilized to access oil and natural
gas resources from shale rock formations that were previously
either technically impossible or uneconomic to produce. Production
from the oil sands in Western Canada has also risen significantly. In
aggregate, production in North America has grown from 7.5 million
barrels per day in 2008 to 11.0 million barrels per day in 2013, an
increase of over 45% in a five year period (see Figure 1).
These new supplies, which are available to meet U.S. domestic
petroleum product demand, have substantially reduced U.S.
dependence upon crude oil imports from overseas. Continued
efficient development of domestic resources promises even greater
improvement in the domestic supply-demand balance.
The beneficial growth in North American crude production has not
come without growing pains. Much of the new production in the U.S.
is not located where it can be handled by the current pipeline network,
and the growth in Canadian production has simply overwhelmed
existing pipeline capacity. As a result, some oil pipelines in the U.S.
0
2Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
4
6
8
10
12
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
TOTAL U.S. AND CANADIAN CRUDE OIL PRODUCTION, 2003–2013 (million barrels per day)
United States Canada
Source: EIA and NEB.
Notes: Historical U.S. data is the average of U.S. Weekly Supply Estimates. Canadian crude oil figures are annual averages.
2013 U.S. production data is from the crude oil production numbers in the EIA Short Term Energy Outlook, January 2014.
2013 Canadian production is from the NEB estimated production for 2013.
1
Source: U.S. Energy Information Administration (EIA)
and Canadian National Energy Board (NEB)
46%GROWTH
U.S. and Canadian Oil Production
(million barrels per day)
2008
7.5 2013
11.0
5
From 2003 through 2007 crude oil prices more than doubled from
their historical level due to strong demand increases from China and
India. Then in 2008, prices doubled again before falling precipitously
along with worldwide economic activity. Since then, crude oil prices
have climbed steadily to about three times where they started in
2003, as seen in Figure 2, which plots spot prices for U.S. and
European benchmark crudes, respectively West Texas Intermediate
(WTI) and Brent.

have reversed flow and/or expanded to accommodate the production
growth and allow additional flows of oil. Several new pipelines are
also being proposed in the U.S. to allow increasing oil production
to reach refining centers and in Canada to move new supplies to
export markets. Increasing volumes of oil are being transported by
rail or barge in response to the slow development of new oil pipeline
capacity.
Another problem is that U.S. production is not of the type that
many domestic refineries are designed to process efficiently. This
mismatch necessitates movement of crude oil over longer distances
to deliver it to refineries for which it is suited, potentially lifting
U.S. restrictions on crude oil exports, or some combination of such
measures. Thus, processing and transportation constraints have
become significant issues confronting North American oil markets.
Left unresolved, these constraints may limit North America’s ability to
take full advantage of its new crude oil resources.
While the domestic crude oil supply situation has improved,
domestic prices of petroleum products remain linked to supply and
demand conditions in the global market for crude. The large swings
consumers have seen over the last decade in the prices of gasoline,
heating oil, and other petroleum products were driven by large
movements in prices established in international crude oil markets.
0
20
40
60
80Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
100
120
140
160
Jan-2003 Jan-2005 Jan-2007 Jan-2009 Jan-2011 Jan-2013
WTI AND BRENT SPOT PRICES (dollars per barrel) Cushing, OK WTI Spot Price
Source: EIA
Europe Brent Spot Price
2
Understanding Crude Oil and Product Markets 6
Facts about World Oil Markets
There are periods of time when the price of crude oil is relatively
stable and other periods when the price can become volatile,
changing quickly and by a significant amount. What are the main
determinants of the price of crude oil, and what impact has it had
on the prices consumers pay for petroleum products?
Let’s start with a few basic facts.
• First, crude oil and petroleum products are global commodities
and, as such, their prices are determined by supply and demand
factors on a worldwide basis. They are shipped from many
sources to many markets (see Figure 3).
• Second, the price of crude oil is the most significant factor
determining the prices of petroleum products. Consequently, the
price of gasoline is largely determined by the worldwide demand
for and supply of crude oil.
• Third, prices reflect the interactions of many buyers and sellers,
each with their own view of the demand for and supply of crude
oil and petroleum products. These interactions occur both in
the physical and futures markets, with the attendant prices
responding quickly to both current and expected future changes
in supply and demand conditions.Gulf Oil & Gas Product
Gulf Oil & Gas Product Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
• Rapid growth in demand in countries like China and India
more than offset declines elsewhere, and by 2006 had all but
eliminated spare crude production capacity. Continued growth in
these regions since 2010 has also affected prices more recently.
• Conflict in the Middle East and Africa caused reductions in
supply and uncertainty about future production.
• Severe worldwide recession in 2008-2009 dramatically reduced
economic activity and demand for crude oil and petroleum
products, thus lowering their prices until economies began
What has happened to cause
prices to vary so much?
The answer:
Fundamental changes in
actual and perceived supply
and demand conditions.
Canada
Mexico
United States
South America
Source: BP Statistical Review of World Energy, June 2013.
7
to recover. Increasing crude oil prices after 2009 were also
the result of production cuts by the Organization of Petroleum
Exporting Countries (OPEC) in response to the recession and
reduced demand.
• Increased crude production in the U.S. and Canada and
infrastructure constraints that limit its efficient use continue
to suppress prices for U.S. benchmark West Texas Intermediate
crude oil relative to world oil prices (see Figure 2).
Europe
Singapore
Former Soviet Union
Japan
China
United Kingdom
Middle East
North Africa
Central Africa
West Africa
Australia
India
MAJOR FLOWS OF CRUDE OIL AND PETROLEUM PRODUCTS 3
Understanding Crude Oil and Product Markets 8
Structure of the Crude Oil Market
Oil is the world economy’s most important source of energy and is
therefore critical to economic growth. Its value is driven by demand
for refined petroleum products, particularly in the transportation
sector.
Petroleum products power virtually all motor vehicles, aircraft, marine
vessels, and trains around the globe. In total, products derived from
oil, such as motor gasoline, jet fuel, diesel fuel, and heating oil, supply
33% of all the energy consumed by households, businesses, and
manufacturers worldwide2
. By way of comparison, natural gas and
coal supply 22% and 28%, respectively, of the world’s energy needs3
.
The principal activities, as illustrated in Figure 4, involved in moving
crude oil from its source to the ultimate consumer are:
• Production, which involves finding, extracting, and transporting
crude oil;
• Refining, the process by which crude oil is turned into products
such as gasoline; and
• Distribution and marketing, which focus on moving those
products to final consumers.
These activities occur within a global marketplace—an extensive
physical infrastructure that connects buyers and sellers worldwide,
all supported by an international financial market. The physical
infrastructure encompasses a vast array of capital, including drilling
rigs, pipelines, ports, tankers, barges, trucks, crude oil storage
facilities, refineries, product terminals—right down to retail storage
tanks and gasoline pumps.
The physical infrastructure links an international network of
thousands of producers, refiners, marketers, brokers, traders, and
consumers buying and selling physical volumes of crude oil and
Terminal/Storage/
Hub Location
Platform
Producers
Wellhead
Producers
Pipeline
Ship/Barge
Rail
9
petroleum products throughout this chain of production.
The international market responds to shifts in crude oil production
and consumer demand in differing geographic areas. Activities in
the physical markets are supported by futures and other financial
contracts that allow buyers and sellers to efficiently insure themselves
against significant price and other business risks, thereby minimizing
the impact of price volatility on their operations. In sum, the global oil
market comprises thousands of participants who help facilitate the
movement of oil from where it is produced, to where it is refined into
products, and from there to where those products are ultimately sold
to consumers.
The following sections discuss the role of each of these different
activities, focusing on how they have both affected and been affected
by recent changes in oil and petroleum product supply and prices.
This includes the physical segments of the industry (i.e., production,
refining, and distribution) as well as the financial sector, where the
knowledge and expectations of thousands of buyers and sellers
interact and where prices for current and future deliveries of oil are
ultimately formed.
Refineries Bulk Terminal Storage Gas Stations
THE OIL SUPPLY CHAIN 4
Understanding Crude Oil and Product Markets 10
Crude Oil Supply
Growing Oil Production in North
America
Since 2008, U.S. oil production has grown by over 50%. The
recent increases in U.S. oil production have largely come from
unconventional shale and tight oil resources, which have become
more accessible and economic due to advancements in horizontal
drilling and hydraulic fracturing techniques. Figure 5 shows the
substantial growth in U.S. shale and tight oil production, from less
than 0.4 million barrels per day in 2007 to more than 3.2 million
barrels per day recently. The largest shale and tight oil production is
from the Eagle Ford (Texas), Bakken (Montana and North Dakota)
and Permian (West Texas) shale formations.
0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Jan-03
Apr-03
Jul-03
Oct-03
Jan-04
Apr-04
Jul-04
Oct-04
Jan-05
Apr-05
Jul-05
Oct-05
Jan-06
Apr-06
Jul-06
Oct-06
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
SHALE AND TIGHT OIL PRODUCTION (million barrels per day)
All Other Regions Permian (TX) Eagle Ford (TX) Bakken (MT & ND)
Source: EIA
5
Source: EIA
>50%GROWTH
U.S. Oil Production
(million barrels per day)
4.9
2008
2013
7.5
11
0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
LIGHT
HEAVY
CANADIAN CRUDE OIL PRODUCTION BY TYPE (million barrels per day)
Source: NEB 2013 Crude Oil Production forecast. Heavy production includes crude oil production
from In-Stu Bitumen and Mined Bitumen. Light production includes production of Condensates.
6
CANADIAN OIL SANDS
The oil sands located primarily in the western Canadian
provinces of Alberta and Saskatchewan represent the
vast majority of Canada’s crude oil reserves. Extra
heavy crude oil, termed bitumen, is produced from
the oil sands using differing techniques such as
surface mining or in situ techniques utilizing steam to
heat deposits depending on their depth. The bitumen
is highly viscous after initial production and requires
dilution or blending with lighter hydrocarbons for
transportation by pipeline. As discussed elsewhere in
this report, refinery capacity in the U.S., particularly
in the Gulf Coast area, is configured to process large
quantities of heavy crude. Production from Canadian
oil sands is expected to increase from 1.8 million
barrels per day in 2012 to 3.2 million barrels per day in
2020, and then to 5.5 million barrels per day by 2030.
Source: Canadian Association of Petroleum Producers, Crude

Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Jul-08
Crude oils have various attributes that make them more or
less attractive to refiners. West Texas Intermediate (WTI), the
U.S. marker crude traded at Cushing Oklahoma, for example,
is quite different than Western Canadian Select (WCS)
produced and traded in Alberta.
Crude oil that is less viscous and flows more easily, is
referred to as “light,” while more viscous crudes that may
require heating or diluent to flow are considered “heavy.”
In general, light crudes require less processing at a refinery
to produce a more valuable mix of finished products such
as gasoline, diesel, and jet fuel. Without more intensive
processing (and associated investment in complex refining
capacity) heavier crudes tend to produce proportionally
higher quantities of less valuable products such as residual
fuel oil and asphalt. Similarly, certain impurities in crudes
make them much more difficult to process effectively into
refined products that meet current standards. Sulfur is a
common impurity in crude oil that must be removed from
most transportation fuels to meet ever more stringent air
quality requirements. Crudes with a low level of sulfur are
designated “sweet,” while those with a high level are
called “sour.”
Because of the need for much more complex processing,
heavy, sour crude oil typically sells at a lower price than
light, sweet crude. The economics of a refinery depend upon
the mix of crudes processed (crude slate), the complexity
of the refinery processing units, and the desired output mix
of finished products such as gasoline, diesel, jet fuel, home
heating oil, residual fuel, and asphalt (product slate).
While a refinery can handle some variance in its crude slate,
the combination of refining units installed limits the degree
to which the properties of the slates can change and still
efficiently be converted into a particular mix of finished
products.
For example, numerous U.S. refineries have invested in
complex refinery units to process slates consisting primarily
of heavy, sour crudes efficiently into gasoline, diesel jet
fuel and other high valued products. Adding light, sweet
crudes to the input slates for such refineries increases their
crude oil input costs, but does not necessarily provide a
significant enough improvement in valuable product yields to
be profitable.
Understanding Crude Oil and Product Markets 14
differentials that have recently developed between Brent and North
American benchmarks due to production stranded by transportation
constraints. Since late 2010 WTI prices have fallen from parity with
Brent to a persistent discount in the $10 to $25 per barrel range
(see Figure 8). Likewise, prices for light, sweet crude oil produced
from the Bakken shale in North Dakota have declined relative to
Brent as a result of takeaway pipeline capacity constraints. Indeed,
Bakken crude has sometimes traded at lower prices than WTI.
Very recently the prices for Louisiana Light Sweet (LLS) (a crude oil
produced along the U.S. Gulf Coast) have also fallen below Brent
prices, indicating that the Gulf Coast has become over-supplied with
light crude oil relative to refinery demand. These price relationships
are dynamic and will likely change as takeaway capacity and
production changes.
The largest discounts relative to Brent shown in Figure 8 are for
Western Canadian Select (WCS), which is a heavy crude oil stream
consisting of conventional crude oil and bitumen delivered to the
Hardisty terminal in Alberta. The growth in the discounts for WCS
from about $10 (which is to be expected due to its low API gravity)
to $50 per barrel or more reflects constraints in oil pipeline capacity
necessary to move it out of Alberta to refining centers. Pipeline
development has simply not kept pace with production.
Oil Transportation Infrastructure:
A critical part of the supply chain
An important part of the supply chain is the system of pipelines,
railways, barges, tankers, and trucks that deliver crude oil to
refineries in North America. Oil pipelines are particularly important
in that they deliver the vast majority of domestic crude oil supplies
to U.S. refineries. However, oil pipeline development in North
America has not kept pace with the substantial growth in crude oil
production. The resulting bottlenecks prevent efficient transportation
of oil from production areas to consuming markets. Pro-rationing
(apportionment) has been necessary on some pipelines because
shipper requests for transportation have exceeded the capacity
of the pipelines. Thus, local production that should be reaching
U.S. refineries to displace overseas imports is not doing so to the
extent of its potential.
Bottlenecks on the oil pipeline system have also depressed crude oil
prices in North America relative to prices in world markets. This can
be seen in a comparison of prices for West Texas Intermediate (WTI),
the U.S. benchmark crude to those of the European benchmark,
Brent. The WTI price historically tracked the price of Brent, but
in early 2011 WTI prices declined substantially relative to Brent
as seen in Figure 2. Figure 8 provides more detail on the price
-60Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
Gulf Oil & Gas Product
-50
-40
-30
-20
-10
0
10
20
Jan-06
Jul-07
Jan-08
Jul-08
Jul-09
Jan-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
AVERAGE MONTHLY CRUDE OIL PRICE DIFFERENTIALS TO BRENT
(alternative less Brent) (dollars per barrel)

Source: EIA and Bloomberg.
LLS WCS
WTI Bakken
8
15
The growth in North American oil production and the large
locational price differentials are leading to infrastructure investments
to transport these supplies to market. In the past few years, pipeline
companies have built new pipelines and expanded or reconfigured
existing pipelines to transport growing supplies in the Bakken,
Eagle Ford, Permian, and Western Canadian supply areas to
refining markets in the United States, and many additional pipeline
projects are being proposed and developed to accommodate the
supply growth.
While pipelines historically transported crude oil supplies from
the Gulf Coast to northern locations (such as the Midwestern U.S.),
some pipelines have recently reversed flow to transport the
growing production from northern locations in the U.S. and Canada
to the Gulf Coast. These reversals include the Seaway Pipeline
(from Cushing, Oklahoma to Freeport Texas) and the Pegasus
Pipeline (from Patoka, Illinois to Nederland, Texas). Earlier reversals
included the Spearhead pipeline, which was reversed in 2006 to
transport supplies from Chicago to Cushing. A new pipeline, the
Gulf Coast Pipeline Project (from Cushing to Nederland, Texas),
has recently come on line to further alleviate these constraints and
another new pipeline, Flanagan South, is also being developed along
the same corridor as Spearhead to transport supplies from Chicago
to Cushing. Figure 9 shows some of these pipelines that will allow
additional crude oil supplies to flow to the Gulf Coast.
Canadian
Oil Sands
Permian
Zama
Regina
Cromer
Gretna
Clearbrook
Niobrara
Portland
Fort St. John Fort McMurray
Cheecham
Seattle
Salt Lake
City
Superior
Steele City
Midland
Freeport
Houston
Nederland
New Orleans
Cushing
Chicago
Flanagan Toledo
Sarnia
Buffalo
Toronto
OttawaMontreal
Patoka Denver
Casper
Bakken
Calgary
Lethbridge Minot
Vancouver
Edmonton
Hardisty
Wood River
Source: Pipeline Company Websites.
KEY:
Seaway Reversal & Twin (2014),
850 kbpd
Pegasus Pipeline (existing), 95 kbpd
Spearhead Pipeline (existing), 190 kbpd
Gulf Coast Pipeline (2014), 700 kbpd
Flanagan South (2014), 600 kbpd
Sandpiper Pipeline (2016), 225 kbpd
Mustang (existing), 100 kbpd
Trans Mountain Expansion (2017),
590 kbpd
Keystone Pipeline (existing) , 500 kbpd
Express (existing), 280 kbpd
Platte (existing), 160 kbpd
Enbridge Mainline (existing), 2500 kbpd;
Enhancements (2015), 350+ kbpd
Bridge Tex (2014) & Permian Express II
(2015), 530 kbpd combined
Important Oil Plays
Eagle Ford
SELECTED CRUDE OIL PIPELINES AND RECENT PROJECTS 9
Understanding Crude Oil and Product Markets 16
Growing oil sands production and low Canadian heavy oil prices
have resulted in several proposals for new greenfield pipelines
to transport these supplies out of Alberta, including Keystone XL,
Energy East, and Northern Gateway. Keystone XL would transport
additional Canadian supplies to the U.S., while Energy East would
target eastern Canadian refineries and export markets and Northern
Gateway would transport supplies to the west coast of British
Columbia for export purposes. Existing pipelines are also proposing
expansions, including Trans Mountain pipeline (to the west coast of
British Columbia) and Alberta Clipper Pipeline (for export to the U.S.).
Figure 10 shows the relationship between projected Canadian oil
production growth and takeaway oil pipeline capacity.
Rapidly growing production and the comparatively slow development
of new pipeline capacity has led to an increasing amount of oil
transported by barge, truck, and rail. Several rail terminals have
been developed in North Dakota in the past few years, and by the
end of 2013 roughly 700,000 barrels of Bakken crude oil were
being shipped daily by rail to refineries in the Gulf Coast, East Coast,
and West Coast5

Elite Torrent

Overview gulf-oil-gas-product

Related

Related

Related Posts