Fuel finds its way back to the well: Analysis
As crude and natural gas liquids infrastructure continues to point outward from North American inland basins, a small wave of refined products projects is moving against the tide in Texas.
Increasing fuel demand in the state has prompted shipper interest in new pipelines and other projects, and midstream providers have responded, with more possibly to come.
"Demand for refined products on our system has been increasing for the markets we serve in west Texas," Magellan Midstream Partners said earlier this month. "Demand has increased as crude oil production in the Permian is continuing to grow."
Permian pressure
Booming upstream activity in the Permian basin of west Texas and eastern New Mexico has created a feedback loop: production increases, much of it is sent to the coastal refinery belt where it is processed into fuel, which in turn is sent back to power drilling and hydraulic fracturing equipment and the growing fleet of trucks needed to move produced liquids, sand, water, diesel and other items.
The western leg of Magellan's 100,000 b/d refined products system out of Houston already serves the area, and the company is building new pipe and pumping power to boost that to 150,000 b/d. The expansion from Frost, in north Texas, to Odessa originally was 40,000 b/d when it was announced in March, but it grew by the time an initial open season was completed in early May. Now a second open season for an additional 35,000 b/d of capacity and possibly a new terminal is underway, continuing until 11 July.
And the company might not be done.
"We are constantly evaluating opportunities to provide flexible transportation and storage services to meet the needs of our customers," Magellan said.
The new capacity could be ready in 2020. While greater demand from Abilene to El Paso is the driver, Magellan's system also can feed into its trans-border pipeline at El Paso and Kinder Morgan's SFPP East pipeline that runs from El Paso to Tucson and Phoenix in Arizona.
Magellan's project would come full circle from the early days of the latest Permian boom when it reversed and converted its westbound Longhorn products pipeline into a crude pipeline that today can move 275,000 b/d from the Permian basin town of Crane to Houston. It was the first of what has become many major new crude takeaway projects from the region.
Another major developer of outbound Permian crude pipelines, Energy Transfer Partners (ETP), also is looking to send fuel back. A binding open season ended this week for a proposed 30,000 b/d diesel pipeline from Hebert, near Beaumont, to Midland, with service available by the end of 2020.
The company declined to comment on the status of the open season.
Holly Energy Partners, which operates the 100,000 b/d Navajo refinery in the region at Artesia, New Mexico, has proposed a 30,000 b/d diesel truck rack near Orla, Texas, in the production sweet spot of the Permian.
"This asset will serve growing diesel demand associated with the oil patch activity in and around the Delaware basin," chief executive George Damiris said last month.
Delek, which runs the 73,000 b/d refinery at Big Spring on the Permian's eastern edge, saw 30¢-35¢/USG diesel margins at its 300 Alon-branded stores from central Texas to New Mexico during the first quarter. Chief executive Uzi Yemin said he welcomes competition from incoming fuel providers, but said matching its distribution capability will be a challenge.
"It is not easy to get to that part of the country," Yemin said last month, adding that he expected margins to shrink to 14¢-15¢/USG this summer.
Another possible source of fuel in the region could be the proposed 10,000 b/d MMEX Resources refinery at Fort Stockton, Texas, in the Delaware basin region. Developers say the project, which is not yet under construction, could be producing up to 4,000 b/d of high-sulfur diesel usable by upstream equipment by the end of next year.
Plans eventually call for a 100,000 b/d refinery with an eye toward exporting products to Mexico by rail.
Destination: Dallas
Meanwhile, midstream companies are looking elsewhere in Texas to find new homes for products produced on the coast. The 660,000 b/d Explorer pipeline, which takes Texas fuel and natural gasoline north into the midcontinent, has added at least 10,000 b/d of new capacity from Houston to Arlington, between Dallas and Fort Worth.
"We do have other projects on our plate but just are not quite able to discuss them at this point," Explorer said last week.
Magellan, which in 2013 made a products line from Dallas to southern Oklahoma bidirectional to allow shippers to take advantage of shifting arbitrage conditions, is expanding its southern system by 85,000 b/d. Part of that growth will involve a new line from Houston to Hearne, about halfway to Dallas, and reversal of a southbound line from Frost to Hearne.
Magellan has said the expansion would be ready in late 2018. The company also is reactivating a jet fuel pipeline serving Bush Intercontinental Airport in Houston.
Related news posts
LNG Energy eyes sanctions-hit Venezuela oil blocks
LNG Energy eyes sanctions-hit Venezuela oil blocks
Caracas, 25 April (Argus) — A Canadian firm plans to revive two onshore oil blocks in Venezuela, but the conditional deals signed with struggling state-owned PdV come just as the US is reinstating broad sanctions on the South American country. LNG Energy Group's Venezuela unit agreed two deals with PdV to boost output in five fields in the Nipa-Nardo-Niebla and Budare-Elotes blocks, which produce about 3,000 b/d of light- to medium-grade crude, the company said on Wednesday. The Canadian company, which operates in neighboring Colombia, would receive 50-56pc of production of the blocks. Venezuela's oil ministry declined to comment. But finalizing the contracts depends on providing required investment to develop the fields within 120 days of the contract signing on 17 April, LNG Energy said. And the signing came on the same day as the US reimposed oil sanctions on Venezuela and gave most companies until 31 May to wind down business. LNG Energy Group said it intends to comply with existing and upcoming US sanctions, noting that the conditional contracts were executed within the terms of the temporary lifting of sanctions — general license 44 — but it will abide by the new license 44A. The reimposition of US sanctions on Venezuela prohibits new investment in the country's energy sector, at the threat of US criminal and economic penalties. "The company will assess in the coming days the applicability of license 44A to its intended operations in Venezuela and determine the most appropriate course of action," LNG Energy said. "The company intends to operate in full compliance with the applicable sanctions regimes." The two blocks are in the adjacent Anzoategui and Monagas states, part of the Orinoco extra heavy oil belt. Most of Venezuela's output is medium- to heavy-grade crude. Both PdV and Chevron have drilling rigs working in those two states, in separate workover and drilling campaigns. Venezuela is now producing above 800,000 b/d, after the US allowed Chevron to increase production and investment under separate waivers. By Carlos Camacho Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
US economic growth slows to 1.6pc in 1Q
US economic growth slows to 1.6pc in 1Q
Houston, 25 April (Argus) — The US economy in the first quarter grew at a 1.6pc annual pace, slower than expected, while a key measure of inflation accelerated. Growth in gross domestic product (GDP) slowed from a 3.4pc annual rate in the fourth quarter, the Bureau of Economic Analysis (BEA) reported on Thursday. The first-quarter growth number, the first of three estimates for the period, compares with analyst forecasts of about a 2.5pc gain. Personal consumption slowed to a 2.5pc annual rate in the first quarter from a 3.3pc pace in the fourth quarter, partly reflecting lower spending on motor vehicles and gasoline and other energy goods. Gross private domestic investment rose by 3.2pc, with residential spending up 13.9pc after a 2.8pc expansion in the fourth quarter. Government spending growth slowed to 1.2pc from 4.6pc. Private inventories fell and imports rose, weighing on growth. The core personal consumption expenditures (PCE) price index, which the Federal Reserve closely follows, rose by 3.7pc following 2pc annual growth in the fourth quarter, although consultancy Pantheon Macroeconomics said revisions to the data should pull the index lower in coming months. The Federal Reserve is widely expected to begin cutting its target lending rate in September following sharp increases in 2022 and early 2023 to fight inflation that surged to a high of 9.1pc in June 2022. By Bob Willis Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Indonesia's Pertamina to complete gasoline unit in Aug
Indonesia's Pertamina to complete gasoline unit in Aug
Singapore, 25 April (Argus) — Indonesian state-controlled refiner Pertamina aims to finish building its new 90,000 b/d residual fluid catalytic cracker (RFCC) in the Balikpapan refinery in August, the firm said. The RFCC is a gasoline production unit, which typically uses residual fuel as a feedstock. The unit will be able to produce propylene, LPG and 92R gasoline that will meet the Euro V specifications, said Pertamina last week, without disclosing further details such as the start-up date. The newly built RFCC unit will be the largest in Indonesia, with the second-largest being the 83,000 b/d RFCC in Balongan and the third-largest the 54,000 b/d RFCC in Cilacap. The new RFCC will also help reduce Indonesia's reliance on gasoline imports. Indonesia currently imports around 9mn-11mn bl/month of gasoline, making it the largest gasoline buyer in the Asia-Pacific. The new RFCC will increase Pertamina's gasoline production by a conservative estimate of 45,000 b/d or 1.3mn bl, or around 10pc of Pertamina's current import demand, according to estimates from an oil analyst. The installation of the new RFCC is part of Pertamina's Refinery Development Master Plan (RDMP), which will take place in two phases. The first phase includes revamping existing units at the Balikpapan refinery, such as the crude distillation unit, vacuum distillation unit, and hydrocracking unit. It also involves building new units, such as the aforementioned RFCC, a gasoline hydrotreater, diesel hydrotreater, and naphtha hydrotreater. The second phase includes building a new residue desulphurisation unit. The RDMP also includes expanding the capacity of the Balikpapan refinery from 260,000 b/d to 350,000 b/d, said Pertamina's chief executive officer Nicke Widyawati. The Balikpapan expansion is expected to be completed in May. By Aldric Chew Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Barge delays at Algiers lock near New Orleans
Barge delays at Algiers lock near New Orleans
Houston, 24 April (Argus) — Barges are facing lengthy delays at the Algiers lock near New Orleans as vessels reroute around closures at the Port Allen lock and the Algiers Canal. Delays at the Algiers Lock —at the interconnection of the Mississippi River and the Gulf Intracoastal Waterway— have reached around 37 hours in the past day, according to the US Army Corps of Engineers' lock report. Around 50 vessels are waiting to cross the Algiers lock. Another 70 vessels were waiting at the nearby Harvey lock with a six-hour wait in the past day. The closure at Port Allen lock has spurred the delays, causing vessels to reroute through the Algiers lock. The Port Allen lock is expected to reopen on 28 April, which should relieve pressure on the Algiers lock. Some traffic has been rerouted through the nearby Harvey lock since the Algiers Canal was closed by a collapsed powerline, the US Coast Guard said. The powerline fell on two barges, but no injuries or damages were reported. The wire is being removed by energy company Entergy. The canal is anticipated to reopen at midnight on 25 April. By Meghan Yoyotte Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Business intelligence reports
Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.
Learn more