Tag Archives: Oil imports

East coast refineries slash deliveries of Bakken crude oil

Repost from Reuters
[Editor:  Significant quote: “EIA data shows PES imported more than double the amount between January and July, with cargoes from Nigeria, Chad and Azerbaijan.”] 

U.S. oil refiners look abroad for crude supplies as North Dakota boom fades

By Jarrett Renshaw and Catherine Ngai, November 3, 2015 12:52pm EST
Gasoline-making unit at a PBF Energy Inc refinery in Delaware City, Delaware August 21, 2015.  REUTERS/Charles Mostoller - RTX1P4UV
Gasoline-making unit at a PBF Energy Inc refinery in Delaware City, Delaware August 21, 2015. REUTERS/Charles Mostoller

PBF Energy Inc, one of the largest independent oil refiners in the United States, spent heavily in recent years to build the rail terminals at its Delaware City complex that it needed to take delivery of large loads of crude coming from North Dakota’s Bakken oil fields.

But now it is considering eliminating those deliveries altogether, and replacing them with foreign crude imports, according to two sources familiar with the situation. It has even closed its small Oklahoma City office that was only opened in 2013 and had served as a hub for the company’s trading in North Dakota’s oil, the sources said.

The sudden lack of interest in Bakken crude by PBF, which is run by Thomas O’Malley, one of the biggest names in the U.S. oil refining industry, reflects a dramatic recent change in the way East Coast refineries are sourcing the crude that they turn into everything from gasoline to heating oil and jet fuel.

The boom in the output of oil from North Dakota’s shale has ebbed as producers have begun to cut back in the face of the plunge in prices by nearly 60 percent since the summer of 2014.

North Dakota’s Bakken production peaked at 1.153 million barrels per day in June, and had fallen to 1.13 million barrels per day by August, according to state data.

The supply restraint has made Bakken crude relatively more expensive after transport costs than oil shipped from Latin America, the Middle East and Africa, prompting East Coast refiners to return to a foreign crude diet they derided as unprofitable five years ago.

Three companies that resuscitated failing oil refineries on the East Coast less than five years ago with the promise of cheap domestic oil are now looking overseas instead, four sources familiar with the plans told Reuters.

Together, PBF, Philadelphia Energy Solutions Inc and Delta Airline’s Monroe Energy are expected to cut their Bakken crude intake to the lowest levels since 2013, according to two oil traders who are familiar with East Coast rail arrangements.

PES, which bought a 335,000 barrel-a-day Philadelphia refinery that was slated for closure in 2012, has slashed its Bakken deliveries to just 17 trains in November from a peak of 100 trains a month during the summer, according to two sources familiar with the plant’s operations.

The planned deliveries mark the lowest monthly volume since the company built a new rail terminal to take advantage of the Bakken revolution. EIA data shows PES imported more than double the amount between January and July, with cargoes from Nigeria, Chad and Azerbaijan.

LOCKED INTO PAYING

The price of Bakken hasn’t fallen as much as other oil, nearly wiping out the entire $6 a barrel discount to the U.S. benchmark that it traded at in January and sending refiners scrambling for other sources. Meanwhile, a glut of other crudes has made importing – including transport costs of $2 to $3 a barrel – much more attractive.

Because bringing crude by rail from North Dakota to an East Coast refinery usually costs about $10 to $11 a barrel, without a deep discount for the oil, moving it across the country becomes unprofitable. As a result, Bakken crude is used in the U.S. Midwest and Canada where lower transportation costs make it a profitable option.

East Coast refineries accounted for about 10 percent of nationwide imports of crude in July, according to the latest data from the U.S. Energy Information Administration. That is expected to rise as the Bakken shipments fall further, analysts and traders say.

PBF had poured over $50 million into upgrading its Delaware City rail terminal and signed long-term volume commitments to unload at least 85,000 barrels per day from trains at a fixed $2 a barrel cost, regardless of whether it takes the oil. As a result, the company is locked into paying $170,000 a day.

In a conference call late last week, PBF disclosed that it is only budgeting to take 25,000 barrels a day of Bakken oil delivered by rail at its East Coast refineries in 2016.

The company’s spokesman Michael Karlovich said in an email that the company was transferring its single employee in the Oklahoma office to its headquarters in New Jersey, but declined to provide additional detail about the company’s Bakken strategy.

PBF’s Delaware City refinery imported about twice as much crude in July as in January, bringing in cargoes from Colombia and Peru, according to data from the U.S. Energy Information Administration. The company’s Paulsboro, New Jersey, refinery increased its imports by 50 percent in the same period.

PES declined to comment on the shifting crude slate, while Monroe Energy did not respond to requests for comment.

The refiners had previously found that relying on crude from the likes of Colombia, Mexico and Saudi Arabia was unprofitable. But now it may be different provided Bakken crude remains relatively expensive and the U.S. economy doesn’t head into a downturn.

That’s because the refiners are buoyed by increased U.S. fuel demand, partly because of the low oil prices. In 2010, demand was shrinking.

Additionally, they are supported by the closure of underperforming refineries in the Atlantic Basin during the last downturn. And then there is the current availability of deeply discounted crude oil from overseas.

“They are looking for the lowest cost supplies,” said Sandy Fielden, an analyst with RBN Energy. “A few years ago, that was North Dakota, but not today.”

(Reporting By Jarrett Renshaw and Catherine Ngai; Editing by Jessica Resnick-Ault and Martin Howell)
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    US eases crude oil export ban; allows trading with Mexico

    Repost from Associated Press – The Big Story

    US eases crude oil export ban; allows trading with Mexico

    By Josh Lederman, Aug. 14, 2015 3:34 PM EDT

    AssociatedPressEDGARTOWN, Mass. (AP) — The Obama administration approved limited crude oil trading with Mexico on Friday, further easing the longstanding U.S. ban on crude exports that has drawn consternation from Republicans and energy producers.

    Mexico’s state-run oil company Petroleos Mexicanos, or Pemex, had sought to import about 100,000 barrels of light crude a day and proposed a deal last year in which Mexico would trade its own heavier crude for lighter U.S. crude. A major crude exporter for decades, Mexico has seen its oil production fall in recent years.

    The license applications to be approved by the U.S. Commerce Department allow for the exchange of similar amounts of U.S. and Mexican crude, said a senior Obama administration official, who wasn’t authorized to comment by name and spoke on condition of anonymity. The official didn’t disclose whether all 100,000 barrels requested would be allowed.

    While the Commerce Department simultaneously rejected other applications for crude exports that violated the ban, the move to allow trading with Mexico marked a significant shift and an additional sign that the Obama administration may be open to loosening the export ban. Exchanges of oil are one of a handful of exemptions permitted under the export ban put in place by Congress.

    The export ban is a relic of the 1970s, after an OPEC oil embargo led to fuel rationing, high prices and iconic images of long lines of cars waiting to fuel up. But Republicans, including House Speaker John Boehner, have said those days are long gone, arguing that lifting the ban could make the U.S. an energy superpower and boost the economy.

    Republicans from energy-producing states hailed the decision, as did trade groups representing the oil industry. Sen. Lisa Murkowski of Alaska, who has pushed for lifting the ban, called it a positive step but added that she would still push for full repeal “as quickly as possible.”

    “Trade with Mexico is a long-overdue step that will benefit our economy and North American energy security, but we shouldn’t stop there,” said Louis Finkel, executive vice president of the American Petroleum Institute.

    But environmental groups have opposed lifting the ban out of concern it would spur further drilling for crude oil in the U.S. Pemex’s proposal has also drawn criticism in Mexico, where residents are sensitive about the country’s falling oil production despite warnings from officials that Mexico could become a net importer if it doesn’t explore new oil reserves.

    The move to trade crude with Mexico comes as the Obama administration weighs a long-delayed decision about whether to approve the Keystone XL pipeline. That proposed project would carry crude oil from Canada’s tar sands to refineries on the Texas Gulf Coast, so the influx of heavy crude from Mexico could play into a decision about whether the controversial pipeline is necessary.

    Last month a Senate panel approved a bill championed by Murkowski that would lift the 40-year-old-ban — plus open more areas of the Arctic, Gulf of Mexico and the Atlantic Ocean to oil and gas exploration. No Democrats on the committee voted for the bill. The environmental group Oceana called it “a massive give-away to Big Oil.”

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      Iran agreement could spell end to limits on U.S. oil imports

      Repost from Minuteman News, New Haven, CT

      Iran agreement could spell end to limits on U.S. oil imports

      By Emily Schwartz Greco,  July 29, 2015

      What a relief. In exchange for Iran taking steps to guarantee that it can’t build nuclear weapons, the sanctions that have choked off its access to world markets will end without a single shot.

      Instead of celebrating this diplomatic breakthrough, conservative lawmakers are plotting to scuttle the pact. And despite their opposition, some Republicans are milking this accord for a pet project: ending all limits on U.S. crude sales.

      “Any deal that lifts sanctions on Iranian oil will disadvantage American companies unless we lift the antiquated ban on our own oil exports,” Alaska Senator Lisa Murkowski declared a few weeks back.

      It’s an enticing argument. Why should Washington help Iran freely sell its oil while denying the U.S. industry the same liberty?

      Well, the ban is already punctured. The United States, which imports 7 million barrels a day of crude, also exports half a million barrels of it every 24 hours.

      And most of that oil goes straight to Canada by rail or gets hauled to ports by trains after getting extracted from North Dakota’s landlocked Bakken fields.

      Remember that oil train that derailed two years ago in the Quebec town of Lac Megantic, unleashing an inferno that burned for four days and killed 47 people? It was ferrying exported Bakken crude.

      Smaller accidents are happening too. Most recently, an oil train derailed near the tiny town of Culbertson, Montana, spilling thousands of gallons of oil from North Dakota.

      Ramping up exports would only boost the chances of a major disaster, Oil Change International Executive Director Steve Kretzmann says.

      That’s why the restrictions, imposed by Congress during Gerald Ford’s presidency to boost energy independence, should remain unless the government creates better safeguards.

      Besides, Iranian oil sales won’t begin bouncing back until early next year at the soonest as diplomats must first verify compliance with nuclear obligations. But there’s no doubt that more crude will eventually gush from that Middle Eastern country.

      Prior to the 1979 revolution that brought a theocratic government to power, Iran was exporting 6 million barrels a day — quadruple current levels. By 2008, amid lighter sanctions, it was only shipping 3 million barrels a day overseas. Seven years later, that figure has been halved again.

      Iran’s got between 30 and 37 million barrels stored and ready to sell before it even re-starts wells that were shut down when sanctions tightened. As Iran sits atop some 158 billion barrels of oil, the world’s fourth-largest reserves, its potential is huge.

      Will American companies, which can freely export value-added oil products like gasoline, lose out if they can’t ship more crude overseas? Not really.

      Money spent beefing up infrastructure could be wasted if Iran dislodges new markets. Nixing export restrictions could boost production by half a million barrels daily, but many North American wells won’t make financial sense if the Iran gusher adds to the global glut responsible for slashing oil prices over the past 12 months.

      Goldman Sachs analysts expect U.S. oil prices to hover around today’s $50-a-barrel mark for at least another year. If they’re right, many North Dakota and Texas fracking sites won’t be viable anyway.

      And why are prices slumping? Domestic output has nearly doubled under President Barack Obama’s leadership to 9.7 million barrels a day. The United States now drills more oil than Saudi Arabia despite the White House’s calls for climate action.

      While the leaky ban does chip away at U.S. prices, it’s not as if the Obama years have been a bust for oilmen.

      And regardless of whether the industry gets the freedom Murkowski seeks, the United States, Iran, and the rest of the world must figure out how to get by on less oil.

      Columnist Emily Schwartz Greco is the managing editor of OtherWords, a non-profit national editorial service run by the Institute for Policy Studies.
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        California imports of Bakken crude by BARGE sets record in 2014

        Repost from Reuters
        [Editor:  Significant quote: “Bakken transported on water poses unique risks since it is lighter and more volatile than other crudes…. ‘An oil barge accident in San Francisco Bay or off the coast of Los Angeles would be catastrophic,’ said Matt Krogh, a director at environmental group ForestEthics.  ‘Bakken is simply too dangerous to move by barge or train and we don’t need this extreme oil,’ he said.”  (emph. added)  – RS]

        California imports of Bakken crude by barge sets record in 2014

        By Rory Carroll, SAN FRANCISCO, April 16, 2015

        (Reuters) – California imports of Bakken crude oil from North Dakota on barges totaled a record 1.5 million barrels last year, 27 percent greater than the amount that reached the state by rail, the California Energy Commission told Reuters on Thursday.

        The transport of Bakken crude by rail is controversial, with fiery derailments in recent years prompting safety and environmental concerns. In California, 15 cities and towns have passed resolutions opposing the trains in their towns.

        But many California refineries do not have the infrastructure necessary to unload crude oil trains. Attempts to add rail extensions to those refineries have in some cases been delayed due to opposition from environmental groups.

        To get the low-cost Bakken crude to California refineries, producers load it onto trains in North Dakota bound for transport terminals in the Pacific Northwest. From there it is loaded onto barges bound for California refineries, which are better equipped to receive crude from sea vessels.

        David Hackett, president of Stillwater Associates, a refining consultancy, said the Global Partners LP transport terminal in Clatskanie, Oregon, is a key departure point for barges carrying Bakken to California.

        The facility, on a small canal that feeds into the Columbia River, began quietly transshipping oil from trains to barges in 2012 and is now receiving so-called “unit trains”, mile-long trains that only carry crude oil.

        Global Partners did not respond to a request for comment.

        Hackett said refineries such as Tesoro Corp’s facility in Carson, California, are likely destination points for the barges.

        Tesoro declined to discuss its movements of crude oil, saying the information is commercially sensitive.

        Hackett noted that imports of Bakken either by rail or barge represent only a fraction of California’s total crude imports. California imported nearly 300 million barrels of crude from foreign countries such as Saudi Arabia and Iraq last year, he noted.

        But Bakken transported on water poses unique risks since it is lighter and more volatile than other crudes, environmentalists say.

        “An oil barge accident in San Francisco Bay or off the coast of Los Angeles would be catastrophic,” said Matt Krogh, a director at environmental group ForestEthics.

        “Bakken is simply too dangerous to move by barge or train and we don’t need this extreme oil,” he said.

        (Reporting by Rory Carroll; Editing by Ken Wills)
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