US shale growth expected to overwhelm refiners, ports

Port Arthur San Antonio Express News photo.

Increased US shale production is expected to overwhelm refining capacity.  Last October, the Port of Corpus Christi signed an agreement with the US Army Corps of Engineers to expand the shipping channel to accommodate larger tankers.  San Antonio Express News photo.

About half of the new US shale oil will come from the Permian Basin

Growing US shale output will soon put a strain on the country’s refining capacity and shipping facilities, including the Port of Corpus Christi which must expand its shipping channel to accommodate larger tankers.

A study by consultancy Wood Mackenzie highlights the impact of US shale on global markets and the lack of refining capacity to handle rising crude output.  Researchers with the firm say unless new infrastructure is built, the new crude could bottleneck at US Gulf Coast ports.

According to the study, US refineries can absorb up to 1 million barrels per day (b/d) of the expected 4 million b/d of additional production from US oil output.

Three-quarters of the new crude and ultra-light oil known as condensate will be sold to non-US buyers in the coming five years and will compete with Middle East and African crudes on the world markets.

US refiners run medium and heavy crudes and are unable to handle the additional light crude.  With gasoline demand expected to flag in the future, the US is slow to add processing capacity.

ExxonMobil Corp has considered expanding its light-crude refining capacity at its Beaumont, Texas refinery, however, the company has not yet approved the project.

Through 2022, most of the additional crude and condensate exports will be shipped to Europe, following that, it will be exported to Asia.

The Permian Basin will supply about half of the new, mostly-light US oil, according to Wood Mackenzie’s senior analyst for North American crude markets, John Coleman.

Coleman says he believes most of the 1.9 million barrels per day of Permian crude will be shipped to the South Texas petroleum export hub, Corpus Christi.  Currently, two pipelines which will transport crude from the Permian to Corpus Christi are under construction.

In October, the Port of Corpus Christi contracted the US Army Corps of Engineers to expand the ship channel to accommodate larger tankers.

Occidental Petroleum tested loading a very large crude carrier (VLCC) at its terminal in Ingleside, Texas, located near Corpus Christi.  The ship, capable of carrying 2 million barrels of oil, was unable to travel the Corpus Christi ship channel fully loaded.  Loading had to be completed in the Gulf of Mexico.

At this time, the Louisiana Offshore Oil Port, or LOOP, is the only US Gulf Coast facility capable of directly loading and unloading VLCCs, leaving researchers unsure if there is enough US marine terminal capacity and docks to meet the new flows.



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