http://www.forexpros.com/analysis/pumping-oil-through-gas-lines-141206

Early in the year Greg Merrill discussed the current administration's decision to shut down the Keystone pipeline project and the issues surrounding that policy. That was obviously not the end of the story. If there is a need, the energy industry will find a way.
In recent years the various natural gas shale projects have changed the configuration of natural gas delivery in the U.S. That means some of the traditional routes used to transport natural gas to a number of areas - some over long distances -- are no longer economical. And now a number of these gas lines could be modified to transport crude, sometimes in the opposite direction.
JPMorgan: - Given the regulatory challenges facing the construction of some new oil pipelines in North America, many companies are turning to converting existing assets to oil service. With natural gas supplies growing in numerous regions from shale plays such as the Marcellus, gas pipelines delivering along historical routes into these regions are becoming underutilized, providing options for conversion to transport crude oil.
At least four gas lines are under discussion for conversion into oil service that could move oil out of Canada, the US Gulf Coast, and upper Midwest areas. One of the pipes making up TransCanada’s Mainline gas network that runs from western Canada to the eastern border is under consideration for conversion to crude oil, which could reportedly deliver 0.5 to 1.0 mb into Padd 1 and eastern Canadian refineries. Additionally, Energy Transfer Partners has petitioned the U.S. Federal Energy Regulatory Commission to repurpose the Trunkline natural gas line into crude service and reverse the direction to run south from the upper U.S. Midwest into the Gulf Coast. The Pony Express line originating in Wyoming completed an open season for deliveries of approximately 230 kbd of crude into Oklahoma in 3Q2014 after being in gas service since 1997. Lastly, parts of the underutilized El Paso Natural Gas (EPNG) pipeline system are being considered for conversion to transport an estimated 400 kbd of crude to southern California refineries from west Texas.

Here is an example. The Trunkline gas line, developed to deliver natural gas from the Gulf Coast to the Midwest is no longer economical because these customers (in most cases) can get gas from nearby shale sources.

Panhandle Energy: - Trunkline Gas Company operates a 3,059-mile pipeline system with access to Gulf Coast supply sources which can deliver 1.5 Bcf/d of natural gas to Midwest and East Coast markets. Our Midwest customer base includes some of the nation's largest utility and industrial gas users in Chicago, Michigan, Memphis and St. Louis.

Trunkline Pipeline
Trunkline Pipeline
The line doesn't follow the proposed Keystone path exactly, but it could get crude to the Gulf Coast nevertheless. And that's the idea - just move oil in the opposite direction. Of course just like Keystone, these projects are also going to face a great deal of opposition.
Petroleum News: - Operating in the shadows, Energy Transfer Partners, ETP, is trying to gain an edge over others -- notably TransCanada and the partnership of Enbridge and Enterprise Products Partners, EPP -- to offer pipeline access from the Bakken, Alberta oil sands and the Utica shale plays to Gulf Coast refineries.
Industry sources say its plan is pinned on reversing its 770-mile Trunkline system to a southbound operation from the Midcontinent, shifting from the declining natural gas business to the shale-rich core of the United States and beyond to Alberta. They are projecting that the switch to a Gulf-bound crude pipeline could expand Trunkline’s capacity to 400,000 barrels per day from 150,000 bpd. ... Although ETP has kept tight-lipped about its plans, the proposal was dragged into the public spotlight through a motion to “intervene and protest” by Michigan Gov. Rick Snyder filed with the Federal Energy Regulatory Commission. Snyder said the proposal to convert a “key piece of the natural gas infrastructure” in Michigan into an oil pipeline “will not serve Michigan’s energy needs” to heat homes and businesses in a large part of the state.
One way or another the industry will find ways to get crude to the Gulf. As it does so, the U.S job market should benefit -- as it did in Canada -- with multiple businesses springing up to support these projects.

Views: 218

Reply to This

Replies to This Discussion

Crude is getting to the gulf coast as any cursory look at the EIA stockpile numbers would indicate

http://www.eia.gov/oog/info/twip/twip_crude.html

As the second table indicates crude not only continues to pile in the Midwest and Cushing, but Gulf Coast inventory are 17 million barrels above last year.  All without Keystone II adding 800,000 more bpd (though some of that oil is making it there by train.  Gulf coast refineries did spend money and make adjustments expecting to handle more of the Canadian oil, what they failed to prepare for was to be inundated with all the light crudes flowing from the multiple oily shale plays.  On top of all that, neither the Canadian heavy tar sands oil and the light crudes from shale are really what the refiners want,  they want to produce diesel because that's where the best spreads (profits) are right now, especially in the export market.  The Heavy and lights are ill suited for making diesel, what they want is old fashioned West Texas Intermediate and without that, they keep bringing in Saudi and Venezuelan oil.

This article explains the inundation of "dumbell" crude on the US refinery market

http://www.rbnenergy.com/turner-mason-and-the-goblet-of-light-heavy...

As a result, producer/refiners are trying to find new ways to shuffle all the supply around.  Companies are asking the Commerce Department for permission to ship light crude from the Gulf Coast to East Coast refiners in Canada (can't export crude oil from the US without a license).  The finished product would then be imported into the Eastern US for consumption.

http://finance.yahoo.com/news/bp-export-u-crude-canada-000128632.html

There are also early stages of a plan to use to switch an underutilized NG pipeline from West Texas to California into an oil pipeline ans send to light crude to California which would prefer that supply  to the higher coast Alaskan crude they use.  That leaves Alaska crude in the cold (pun not intended) and maybe being shipped to the Far East, public policy permitting.


As for Keystone II, if it makes it all the way from Canada to coast, it may result in much of the oil being exported (if you can export Canadian oil without a license),


AS for the Utica shale play, right now the oiliness of the play is in question and given the midwest glut is seems more likely a plan to get the oil to the East Coast makes more sense. 

RSS

© 2024   Created by Keith Mauck (Site Publisher).   Powered by

Badges  |  Report an Issue  |  Terms of Service