A Bakken and heavy Canadian blend may push out 2 million barrels of daily medium-gravity imports.
At the turn of the century, getting new, onshore-U.S., oil and gas production to market went without concern. Spare capacity in existing infrastructure across the Lower 48 was increasingly available as net, new production was flat to declining.
Soon, getting new natural gas supply to market became an issue for producers beginning with thousands of wells from the Barnett shale. Additional, new gas from the Fayetteville, Marcellus, Haynesville and Eagle Ford resulted in needing to create a supplemental market for it—in transportation and via export.
U.S. oil producers are grappling with these issues as well.
In lieu of exporting it, which is banned but for a few exceptions, Jim Volker believes U.S. refining capacity can be created for an additional 2 million barrels a day of light, sweet from the Williston Basin.
“Based upon the thinking of our friends at Enbridge (Inc.) and others who are planning (to combine) Bakken with (heavy) Western Canadian Select, we think we can displace another 2 million (daily) barrels of medium-grade, Gulf Coast imports,” Volker, chairman and chief executive officer of Whiting Petroleum Corp., said in a keynote address to the IPAA’s OGIS New York attendees.
The API gravity of Bakken crude averages about 40 degrees; Western Canadian Select, approximately 20 degrees. Medium-gravity crude is between 28 and 34 degrees.
In addition, Enbridge’s new Sandpiper pipeline will take 225,000 Bakken barrels a day to East Coast refineries, which are weighted to light, sweet while Gulf Coast refiners are weighted to heavy crude. “We will begin to see Bakken netbacks of more than $90 a barrel…,” Volker said. “(Eastern refiners are) all looking for more light, sweet Bakken crude—from Ohio to Montreal.”
Exporting U.S. oil to destinations outside North America should be an option as well, said Scott Sheffield, chairman and chief executive of Pioneer Natural Resources Co., which is bringing online new, light, sweet West Texas Intermediate from the Permian Basin’s Wolfcamp play.
“(The U.S. is) exporting every hydrocarbon except crude oil, including coal—and LNG (too), beginning late 2015, early 2016,” he noted in a keynote address. Refined-product exports were 4.3 million barrels a day in 2013. Sheffield supports exporting at least a half-million barrels of U.S. light, sweet a day.
Why export an indigenous energy asset? Sheffield said, “We’re trying to be fair on free market. (The U.S. isn’t) banning products (export). I have no idea why, in 1975, they banned (exporting) oil. You would have thought, from a security standpoint, they should have banned products; products are what the military uses.
“…We’ve told the administration and Congress that, if we get in a military issue in the future, ‘all you have to do is shut it down for a period of time.’
“But you don’t want to shut the growth (in U.S. oil production),” which would result in laying down rigs and diminished supply, “and, all of a sudden, start sending troops to the Middle East again and have a huge trade deficit with an oil imbalance. It’s better to allow some exports.”
After all, “we’ve approved 8.5 (billion cubic feet of gas a day) of LNG (export) projects.”
He concluded, “We have to educate…the next president.”
Volker said, “While North America has been doing well in finding new supplies, outside North America, other producers have fallen short. Africa, North Africa, Brazil, the U.K. North Sea, Mexico, Venezuela. Production has actually declined by 2.7 million (of daily) barrels in the last five years from those areas.”
Meanwhile, U.S. oil producers have brought an additional 3 million daily barrels online in the past three years. About a third of that is from North Dakota, which is making nearly 1 million barrels a day now, just as Volker forecasted when presenting in OGIS New York in April 2011.
Daily imports have decreased by more than 2 million barrels, “such that the U.S. trade balance from 2005 to 2013 has dropped by $233 billion,” he said.
-Nissa Darbonne, Author, The American Shales; Editor-at-Large, Oil and Gas Investor, OilandGasInvestor.com, Oil and Gas Investor This Week, A&D Watch, A-Dcenter.com, UGcenter.com. Contact Nissa at firstname.lastname@example.org.