Category Archives: Oil storage

Oil prices dip below zero as producers forced to pay to dispose of excess

US crude has negative value for first time in history as stockpiles overwhelm storage facilities

The Guardian, by Jillian Ambrose and Martin Farrer, April 20, 2020
A record 160m barrels of oil are currently being stored in oil tankers outside the world’s shipping ports. Photograph: US Department of Energy/EPA

US oil prices turned negative for the first time on record on Monday as North America’s oil producers run out of space to store an unprecedented oversupply of crude left by the coronavirus crisis.

The price of US crude oil collapsed from $18 a barrel to -$38 in a matter of hours, forcing oil producers to pay buyers to take the glut of crude which they cannot store, as rising stockpiles of crude threaten to overwhelm oil storage facilities.

“The problem of the global supply-demand imbalance has started to really manifest itself in prices,” said Bjornar Tonhaugen, head of oil at research firm Rystad Energy. “As production continues relatively unscathed, storages are filling up by the day. The world is using less and less oil and producers now feel how this translates.”

The Guardian reported over the weekend that a record 160m barrels of oil was being stored in “supergiant” oil tankers outside the world’s largest shipping ports, including the US Gulf, following the deepest fall in oil demand in 25 years because of the coronavirus pandemic.

The last time floating storage reached levels close to this was in the depths of the financial crisis in 2009, when traders stored more than 100m barrels at sea before offloading stocks when the economy began to recover.

The price collapse in US oil market – known in the industry as the West Texas Intermediate price – accelerated because it is the last day oil producers can trade barrels that are scheduled for delivery next month, when oil storage is expected to reach capacity.

The US price for oil delivered in June, which will become the default oil price from tomorrow, is also falling due to the economic gloom caused by the coronavirus, but has managed to remain above $20 a barrel. On Monday the price for brent crude, the most widely used benchmark, fell 8% to $25.79.

Concerns over the economy, which directly affect oil demand, have been heightened by the growing standoff between the US president and state governors over whether the US can begin to lift restrictions on movement and businesses.

Global oil prices are expected to begin recovering over the second half of the year as tight restrictions on travel to help curb the spread of the virus are lifted, raising demand for fuels and oil.

The world’s largest oil-producing nations have agreed a deal to hold back between 10m to 20m barrels of oil a day from the global market from May, and many oil companies are likely to shut their wells as financial pressures mount.

Cailin Birch, global economist at the Economist Intelligence Unit, said: “US crude oil production has begun to fall in the last two weeks, and will continue to fall in the coming months as already heavily indebted shale firms scale back activity or are forced into bankruptcy or consolidation.”

Despite the historic production cuts, most analysts believe that oil prices will fail to reach the same price levels recorded at the beginning of the year before the outbreak. The global oil price, under the brent crude measure, reached highs of almost $69 a barrel in January before plummeting to less than $23 a barrel at the end of March.

Railroads Resist Oil Companies’ Demands for Storage in Rail Cars Citing Safety Concerns

U.S. railroads push against oil industry demands for storage in rail cars

Reuters, by Devika Krishna Kumar, Laura Sanicola, April 9, 2020

NEW YORK (Reuters) – Railroads are clamping down on rising demand from oil companies to store crude in rail cars due to safety concerns, sources said, even as the number of places available to stockpile oil is rapidly dwindling.

FILE PHOTO: Unused oil tank cars are pictured on Western New York & Pennsylvania Railroad tracks outside Hinsdale, New York August 24, 2015. REUTERS/Lindsay DeDario

Oil demand is expected to drop by roughly 30% this month worldwide due to the worsening coronavirus pandemic, and supplies are increasing even as Saudi Arabia and Russia hammer out an agreement to cut worldwide output. Storage is filling rapidly as refiners reduce processing and U.S. exports fall.

Globally, storage space for crude could run out by mid-2020, according to IHS Markit, and most U.S. onshore storage capacity is expected to fill by May, traders and analysts said.

However, railroads including Union Pacific and BNSF, owned by billionaire Warren Buffett, are telling oil shippers that they do not want them to move loaded crude trains to private rail car storage facilities on their tracks due to safety concerns, three sources in the crude-by-rail industry said.

The railroads are telling clients that tank cars are not a prudent long-term storage mechanism for a hazardous commodity such as crude, and do not want to put a loaded crude oil unit train in a private facility and potentially create a safety hazard, they said.

Federal rules typically only allow crude in rail cars to be stored on private tracks. There is no federal data on how much oil is regularly put in rail storage, but analysts said it is very little.

“Most federal regulations require rail cars loaded with … crude oil to be moved promptly within 48 hours. Therefore, federal regulations discourage shippers and railroads from leaving crude oil in transportation for an extended time,” transportation lawyers at Clark Hill LLC wrote in an article Thursday.

BNSF did not respond to several requests for comment. Union Pacific declined to comment.

Nearly 142 million barrels of crude moved via rail in the U.S. in 2019, representing about 10% of what is transported via pipelines, according to the U.S. Energy Department. Unit trains, made up entirely of tank cars, can carry around 60,000-75,000 barrels.

Even on smaller or mid-sized railroads, known as shortlines, there may be capacity constraints or insurance coverage may not be adequate, the railroads have said, advising rail companies not to store oil.

“It is arbitrary, and is happening at a time when it (storage) is an option being heavily considered by all companies that have access to crude by rail right now,” one of the sources said.

As of September, there was enough crude storage capacity in the U.S. for about 391 million barrels of out of about 700 million working capacity, excluding the strategic reserve, according to the U.S. Energy Department. However, U.S. stocks have risen by 32.5 million barrels in just the last 4 weeks, including a 15-million-barrel gain in the latest week, the most ever.

Crude-by-rail shipments were not economic when oil prices were high but are expected to rise as prices have plunged. Loadings out of the Permian basin, the biggest in the country, slumped to about 12,500 barrels per day (bpd) in January, the lowest in at least a year, before rising to about 13,200 bpd in February, according to data from Genscape.

Demand is falling so swiftly that rail cars loaded with crude may not be accepted by the time they reach their destination three-to-five days later, leaving barrels orphaned without a storage option, one trader said.

Rates to lease rail cars have dropped sharply due to the crash in oil prices, making them more attractive for storage. Lease rates for rail cars have fallen from about $800 per month to about $500, said Ernie Barsamian, founder and CEO of The Tank Tiger, a terminal storage clearinghouse.

Reporting by Devika Krishna Kumar, Laura Sanicola and Laila Kearney in New York; Editing by Chris Reese

Massive refinery fire in Texas left to burn itself out

Repost from The Houston Chronicle
[Editor: Benicia’s worst nightmare…  – R.S.]

To Deer Park residents, fire a reminder of ‘like living on a fault line’

Samantha Ketterer and Emily Foxhall March 18, 2019 Updated: March 18, 2019 4:37 p.m.
Petrochemical fire at the Intercontinental Terminals Company Monday, March 18, 2019, in Deer Park, Texas. | Photo: Godofredo A. Vasquez/Staff photographer

Jodie Thompson pulled over on Independence Parkway, less than a mile away from a petrochemical plant that was leaking plumes of black smoke into the sky.

In her 34 years living in Deer Park, she’d seen flares before. But this was different.

“I trust that they actually know what they’re doing, but inside, I have this doubt,” Thompson said Monday afternoon, watching the flames from inside the safety of her car.

The fire had raged at Intercontinental Terminals Company for more than 26 hours by the early afternoon and spread to eight holding tanks. Even after a shelter-in-place was lifted Monday morning, the fire was still expected to burn for two more days.

The ordeal, in some ways, was part of life in Deer Park, an east Harris County city of more than 33,000 people. Residents said they were familiar with the risks that come with living by the refineries and chemical plants. At a certain point, you have to stop worrying, they said.

“You can’t fret about it,” said Thompson, who is 60. “What are you going to do? You choose to live here.”

Holly Ball, 47, is a newer resident to Deer Park, having lived in the city for just a year. She’s noticed the puffing smoke stacks at the refineries, of course, but wasn’t aware of a threat like this, she said.

Like Thompson and many other residents on Monday, Ball parked her car to take photos of the smoke spreading miles west into Houston. She planned to send them to her friends in Louisiana.

“It’s scary,” she said. Her dog barked in the seat next to her. “It’s scary.”

On Facebook, people responded to official updates with more questions. They wanted to know more about what exactly was happening and what the risks were to their health.

Would the city of Deer Park be evacuated? Was it possible the plant would explode? The shelter-in-place had been in Deer Park, but what about people in the close-by city of Pasadena? And in La Porte?

Some people wrote of alarm sirens that should have gone off but haven’t worked for some time. Even with the shelter-in-place lifted, looking up at the sky, it was hard for many to believe air quality was fine. Some wrote of symptoms they were experiencing.

WHAT WE DISCOVERED: A HoustonChronicle.com investigation found dangerous chemicals create hidden dangers

One person said she had trouble breathing overnight. Two others wrote of burning sensations in their eyes. Another person decided to leave the area because their child was having trouble breathing. Some said they were simply nervous to sleep.

Bernice Oehrlein, 78, pushed a cart in the morning through the Food Town grocery store in Deer Park, about 5 miles southwest of the plant. She recently had a bad bout with pneumonia, so the fire is concerning for health reasons, she said.

“I have a hard time breathing anyways,” Oehrlein said.

At a Starbucks just down the road, Cindy Richards and her daughter drank coffee instead of going on their normal Monday walk.

Richards, a 67-year-old who lives in Pasadena, recalled the drive to Deer Park, before she realized a fire had clouded up the sky.

“I was like, ‘It’s a little overcast,'” she said. But then, “I come a little closer – ‘That’s smoke.'”

Richards doesn’t pay too much attention to the factories anymore, although she said they used to be more top-of-mind when she lived off of Sims Bayou, closer to some of the refineries.

Her daughter, 35-year-old Robyn French, lives close to the plant in Deer Park with her husband and two children. Flares, smoke and a gassy smell have become a normal occurrence, and she knows what to do in the case of an explosion.

But French knew better than to ignore the smoke on Monday, even though she said she felt fairly safe.

She made sure Sunday and Monday that her son wasn’t outside on his bike, breathing in anything possibly dangerous. And the unknown is still concerning.

“Am I still able to eat the Swiss chard and kale I’m growing in my garden?” she asked. “That’s a valid question to me. Will my oranges be full of chemicals when they’re full grown?”

IN THE AIR: What you need to know about the chemicals

Heather Trevino, 42, grew up in Deer Park and lives there now with her 9-year-old daughter. She said she had taken shelter before, but didn’t recall an incident as long and intense as this one.

Trevino saw the smoke rising above her neighbor’s roof Sunday. Her eyes and throat itched. When she got the alert to shelter-in-place, she knew to bring in her two dogs and shut off the A/C.

Trevino faintly heard the sound of the alarms that she said are tested every Saturday at noon. She put on some movies for her daughter, who also learned in school what to do when a shelter-in-place was ordered.

“We kind of get it ingrained in us,” Trevino said. “Living here, it’s just kind of part of what you accept, that there’s something that could possibly happen.”

Thompson likened it to an earthquake-prone area.

“It’s probably like living on a fault line,” she said. “It doesn’t happen very often, but the possibility is always there. In the back of your mind, you push it back. It’s out of your control.”

Anthony, a 36-year-old who works at a nearby plant, said he had to take the day off because of his workplace’s proximity to ITC. He declined to give his last name because of his employer.

While Anthony said he didn’t believe the air quality in the area is particularly bad because of the incident, he’s still concerned of the possibility of an explosion.

“It’s not anything that can really be taken lightly,” he said. “There is a flash point.”

Washington Agency Votes to Reject Massive Oil-by-Rail Terminal

Repost from DeSmogBlog

Washington Agency Votes to Reject Vancouver Energy’s Massive Oil-by-Rail Terminal

By Justin Mikulka • Wednesday, November 29, 2017 – 10:29
Portland, Oregon, bridge with banner reading 'Coal oil gas none shall pass'
Portland, Oregon, bridge with banner reading ‘Coal oil gas none shall pass’

In another major blow to the West Coast oil-by-rail industry, a Washington state agency voted unanimously to recommend Governor Jay Inslee reject the Vancouver Energy oil terminal. Proposed for construction in Vancouver, Washington, along the Columbia River, it would be the largest oil-by-rail facility in the country.

Washington State’s Energy Facility Site Evaluation Council (EFSEC) has been reviewing the project since 2013 — reportedly the longest review period ever for the council. However, its November 28 meeting and vote on the final recommendation for the Tesoro Savage–backed project only took 10 minutes.

Given the reality of climate change, there is simply no reason to build new fossil fuel infrastructure, especially for the export of extreme oil,” said Matt Krogh of activist group Stand, one of many groups opposing the Vancouver Energy project. “The entire reason behind this proposal was to move crude oil from the middle of North America to overseas markets. Simply put, this oil is not for us — and the proposal would leave every single community along the rail lines with all of the risk and none of the reward.”

Vancouver Energy told Oregon Public Broadcasting that the council has “set an impossible standard” for new energy facilities in Washington.

Proposed by Tesoro Savage Petroleum Terminal LLC (also known as Vancouver Energy), the facility is designed to handle 360,000 barrels of oil per day. Expectations are that the facility would receive both the highly volatile light Bakken oil as well as Canadian tar sands oil, with much of it traveling through the Columbia River Gorge. In 2016 an oil train derailed and caught fire in Mosier, Oregon, with some of the oil ending up in the Columbia River, which has already been suffering major declines of its once-historic salmon populations.

Map of proposed Vancouver Energy oil by rail terminal on the Columbia River
A map of the proposed facility from its Final Environmental Impact Statement. Credit: Tesoro Savage Vancouver Energy Distribution Terminal Facility

Despite lower oil prices, U.S. imports of Canadian tar sands oil reached record levels in 2017 and are currently at 3.3 million barrels per day. More of that oil has been moving by rail recently, and as overall tar sands production continues to rise, industry observers predict large potential increases in shipping more of it by rail over the next several years.

Rich Kruger, CEO of tar sands producer Imperial (the Canadian affiliate of ExxonMobil), recently commented on how rail was becoming more attractive as a way to get oil to America.

Rail is increasingly competitive,” Kruger told Bloomberg. “There are times when we look at the pipeline alternative, [but] the variable cost aspect of rail is a more attractive means for us to get to the mid-Western or Gulf coast markets.”

West Coast Oil-by-Rail Plans

Should Washington Governor Inslee, who has 60 days to make a final decision, follow the recommendation to reject the Vancouver Energy oil terminal, it would throw a major wrench in oil industry plans for Canadian tar sands and Bakken oil in the West. As DeSmog reported in June, oil-by-rail remains part of the industry’s long-term plans to get oil to West Coast refineries.

If Governor Inslee stops this project, it will join the growing list of oil terminals in the West rejected after intense local opposition. Earlier this month a California court ruled that an oil refinery and rail project in Bakersfield could not proceed because its environmental review was inadequate.

Earlier this year the Washington Supreme Court voted unanimously to deny an oil-by-rail project in Grays Harbor because that project lacked a comprehensive environmental review that considered the Ocean Resources Management Act.

Also in 2017, a proposed Phillips 66 oil-by-rail project in California was voted down by the San Luis Obispo County planning commission. In 2016 the city council in Benicia, California, voted unanimously to reject Valero’s proposed oil-by-rail project.

Growing awareness of the risks of oil train terminals has led many communities where they are proposed to back away from such projects.

Local Election Was Proxy Vote on Vancouver Oil Terminal

Because Vancouver Energy’s proposed oil-by-rail facility is sited in the Port of Vancouver, a recent electoral race for one of the port commission’s three seats became a proxy fight over the oil terminal.

The race was between Don Orange, owner of a local auto repair shop and opponent of the oil-by-rail project, and Kris Greene, an insurance agent who was backed by large amounts of money from oil and rail corporations. Oregon Public Broadcasting reported Greene raised “nearly $600,000, with 87 percent coming from Vancouver Energy and backers of the project” and also received support from a PAC, funded in part by rail company BNSF and Tesoro, which spent $160,000.

However, Orange also raised close to $400,000, with considerable support coming from the Washington Conservation Voters Action Fund.

Orange thought there was little question why so much money was pouring into a local election for a seat on a commission that pays around $10,000 a year.

This is a choice of what our economy should look like,” said Orange. “It is a choice of having a vibrant small business economy or becoming a big oil town.”

The election’s results showed how the majority of the community felt about the oil-by-rail project: despite being outspent by Greene, Orange won over 64 percent of the vote.

Current port commissioner Eric LaBrant was shocked by the results, saying, “I’ve never seen anything like this in local politics … This election shows where the community wants to go and what kind of business the community wants to have there at the port.”

Still, the final decision on the oil terminal lies with the governor, and even then, the door remains open for either side to take legal action.

Main image: People’s Climate March PDX Credit: David SierralupeCC BY 2.0