Replies to This Discussion

Permalink Reply by jim weyland on June 30, 2014 at 9:06

fwiw, unless i'm mistaken, in the lower 48, the baaken is largely found in n dakota.

like you and tc, i am concerned by the gas volumes that the state of n dakota allows to be flared. why do they allow it? imo, they want their crude/condensate severance revenues today. that's where the real money is.

and, if they have to allow that pesky old natural gas to be flared in the meanwhile until adequate new gas takeaway capacity is in place, well, so be it.

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Permalink Reply by jffree1 on June 30, 2014 at 12:44

You're most certainly correct. I don't think about the Baaken often so my compass is most likely off a bit. But the waste is troubling, especially with politicians prone to spouting off endlessly about limiting LNG exports, yada yada...

Could the slow pace of pipeline construction have to do with gas in storage capacity and not wanting to add that production to the total, if they don't have to?

Permalink Reply by jim weyland on June 30, 2014 at 13:26

jffree1,

the short answer is, i do not believe that gas and/or oil/condensate storage capacities are the case.

but, there's something going on up there that, imo, for whatever reason(s), is seeming to impede the construction of new oil/condensate p/l's and gas p/l's.

maybe its topology/geography. i just don't know.

and, politics is always something to not rule out.

what's clear, though, is that the baaken resource(s) is/are there in enough quantities to economically justify building new p/l's to get the stuff(s) out of there. likely, to existing out of state pipelines w/present capacities to receive the new condensate/oil and gas volumes.

fwiw, in my experience, there're no hydrocarbon industry conspiracies to restrain/contain the free movement of hydrocarbons from sources to markets. 

jim weyland

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Permalink Reply by tc on June 30, 2014 at 14:37

The question is cost.  Does a operator want to pay $6 to transport $5 of NG.  Remember that the operator needs to pay for all the gathering lines to collect the NG, before they then move it to a intra/inter state pipeline.  So do the individual wells in the Bakken produce enough NG to pay for the gathering lines.  With the super cold winters in North Dakota  how far below the surface do the gathering lines need to be placed to be below the frost line and how much does it cost, especially when you consider they have few months to dig compared to the South.

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Permalink Reply by jffree1 on June 30, 2014 at 15:26

I hadn't thought of that, tc. We're used to the south and I accept that "plow depth" gathering lines probably wouldn't be nearly sufficient that far north. It's just a tough location to bring into production... being stranded like it is, but I'm hopeful that everything will be ironed out eventually. Just wish they'd stop wasting that gas.

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Permalink Reply by tc on July 1, 2014 at 2:31

A very interesting and informative article about flared gas in the Bakken.  They actually have more infrastructure than I thought as the only flare 30% of the gas.  Also it looks like the problem is not only pipelines, but also lack of gas processing plants.

https://finance.yahoo.com/news/north-dakotas-latest-fracking-proble...

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Permalink Reply by Skip Peel - Mineral Consultant on July 1, 2014 at 2:50

Following long ban, U.S. could dominate global light oil supply

reuters.com  Mon, Jun 30 2014  By Edward McAllister

NEW YORK, June 30 (Reuters) - After decades of isolation, the United States is set to become a major player in the global trade of ultra light oil as recent government export approvals attract interest across the world.

Following rulings disclosed this week, U.S. companies can now export the light, gaseous petroleum known as condensate after a forty-year ban, giving them access to needy markets in Latin America and Asia and potentially threatening the dominance of other established producers in the Middle East and Africa.

Companies are ready to ship condensate from some of the United States' massive oil and gas fields within weeks. By the end of the year, as much as 300,000 barrels could be exported each day, according to analysts at Citi in New York, a timely event as Asian countries increase capacity to import and exporters elsewhere face headwinds.

"It could have an enormous impact," said Al Troner a condensate expert and president of Asia Pacific Energy Consulting. "It could happen within the next two weeks."

Up to one million barrels of condensate is produced each day in the United States, all of which can be exported after some basic refining to reduce volatility, known as stabilizing, according to the U.S. ruling. That is double the amount exported by Qatar, the world's leading condensate producer.

The amount exported and where it goes depends on the kind of condensate that is produced and whether it is the right grade to feed petrochemical plants in China or Japan or to dilute heavy crude produced in Latin America.

Enterprise Products Partners and Pioneer Natural Resources this week both said that they have received private go-ahead from the Commerce Department to export condensate. Enterprise said it is ready to start exporting anytime.

Exports of condensate, a major feedstock for the petrochemical industry, will provide the first outlet for the vast amounts of oil and gas now produced in the United States. It will also give an inkling of the impact that a U.S. drilling boom could finally have abroad if other types of crude are approved for export.

Buyers are already interested, not just in nearby Latin America - the closest destination for U.S. condensate - but further afield in India and east Asia, traders and sources said.

In Latin America, companies could use condensate as a substitute for naphtha to lighten local heavy crude. Venezuela's state-run oil producer PDVSA and firms operating in Colombia including Ecopetrol and Pacific Rubiales, some of which already buy from West Africa, are "lined up waiting to buy light crudes and condensates if the price is right" said one trader working in crude purchases, speaking on the condition of anonymity.

In India, Essar Oil's chief executive L K Gupta said "we will look at buying condensate from the United States if the pricing is right. We do buy condensate and if a new source is opening up that is good for us".

It is unclear what the cost of U.S. condensates would be, given that the price depends on the density and where it is produced. Some condensate from the Eagle Ford play in Texas does appear to be cheaper than some grades currently exported from Australia's North West Shelf, according to traders and Reuters data.

"According to an internal analysis at our company, the U.S. condensate based upon (U.S.) WTI pricing appears to have cost competitiveness compared with those from the Middle East based upon Dubai crude," said one Seoul-based refining source, adding that competitive U.S. exports could help bring down global prices.

LENGTH TO TIGHTNESS

The Middle East dominates supply of condensate. Qatar and Iran export 760,000 barrels per day combined, about half daily global supply, according to a presentation in November by analysts at Facts Global Energy. Australia and Africa make up most of the rest.

The majority of supply heads to Asia, where importers like China, Japan and South Korea have build processing plants known as splitters that can turn condensate into naphtha and other oil-related products. In Asia Pacific, splitters can process up to 900,000 barrels per day of condensate, according to Facts.

But as demand rises, production from existing exporters is faltering. In Australia, where condensate is a by-product of liquefied natural gas production, exports are already declining in part because new gas produced is "drier" than before. In Qatar, domestic demand is set to slow exports. Iranian output has been hampered by sanctions.

"The condensate market East may move from length to tightness," the Facts report said.

It remains to be seen if the United States can fill the gap, and it is expected to take time to determine whether U.S. condensate is compatible with Asian importers' needs. Some said that no moves have been made to export condensate to Asia from the United States. Sampling could take months, others said.

But with demand on the rise, the United States could offer unexpected respite.

"What we hope is this (U.S.) export will help pull down prices of shipments from the Middle East as overall supplies in the global market increase," the Seoul-based refinery source said. (Reporting By Edward McAllister in New York, Marianna Parraga in Houston, Nidhi Verma in New Delhi, Meeyoung Cho in Seoul, Florence Tan in Singapore, James Topham and Osamu Tsukimori in Tokyo; writing by Edward McAllister; editing by Jessica Resnick-Ault, Bernard Orr)

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Permalink Reply by jim weyland on July 1, 2014 at 9:25

tc,

good point inre: frost heave of buried pls if not set deep enough. every now and then in the winter transcanada pl will suffer an outage from from frost heave. and, they know something about pipe-lining in frigid conditions

as to gas price, the state should require operators to save/gather gas rather than flare it. waste is waste, and the state would collect severance tax on gas volumes produced and saved.

but even should the operator loose money on the gas, he'll make a bunch on the oil.

as to gas processing capacity, the lead time on cyro plants isn't all that long. the baaken has been around for quite a while now. 

and, one could install a straddle plant(like they do on the beach where gom offshore pipelines come ashore) on existing mainline pls currently flowing pl quality gas.

jim

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Permalink Reply by Skip Peel - Mineral Consultant on July 3, 2014 at 3:56

First U.S. condensate cargo up for sale in Asia as ban eases

By Florence Tan    Wed Jul 2, 2014 11:49pm BST reuters.com

(Reuters) - A U.S. energy company launched a broad effort this week to find buyers for the first ever U.S. exports of ultra-light condensate oil, signaling the start of what could be a growing trade as demand grows worldwide.

One week after U.S. authorities confirmed a ruling easing a 40-year ban on shipping lightly processed oil abroad, Enterprise Product Partners (EPD.N) has sold its first cargo to a Japanese trading house and was seeking more buyers in Latin America, according to trading sources.

Two Singapore-based sources said Japanese trading house Mitsui & Co Ltd (8031.T) had bought a 400,000-barrel cargo of U.S. condensate that is expected to be loaded and sent to Asia later this month or in early August. The firm was marketing that cargo to refiners, they said.

One trader at a major global oil company said Enterprise had offered to sell it condensate for export and asked about making potential sales to Latin America.

The preliminary marketing efforts are the strongest evidence yet that U.S. oil companies are on the verge of unleashing light, gaseous petroleum from the country's massive oil and gas fields to markets overseas. By the end of the year, as much as 300,000 barrels could be exported each day, according to an analysis done last week by Citi in New York.

The deal follows news last week that two companies - Enterprise and Pioneer Natural Resources (PXD.N) - have approval from the U.S. Department of Commerce to export condensate that had been minimally processed to reduce volatility.

The approvals represent a softening of a total ban on U.S. oil exports that has been in place since the Arab oil embargo of the 1970s, and they open up the United States to global oil consumers for the first time in a generation.

"A lot of traders are asking us about it and telling us they're trying to get more cargoes from Enterprise especially this week and next week," one of the traders said. "So far, I didn't hear any end users in Asia bought."

U.S. condensate supply is estimated at about 1 million barrels per day.

Enterprise and the U.S. unit of Mitsui were not immediately available for comment.

"I believe this is the first approved export of condensate outside of Canada (since the export ban)" said Al Troner, a condensate expert and president of Asia Pacific Energy Consulting. "It will become fairly regular now."

Traders are rushing to ship condensate to Asia, the major condensate import market where new processing units, known as splitters, are expected to begin operating in the third quarter, sources said. Condensate is a major feedstock for the petrochemical industry.

Importers like China, Japan and South Korea have splitting capacity that can turn condensate into naphtha and other products. In Asia Pacific, splitters can process up to 900,000 barrels per day of condensate, according to a presentation by Facts Global Energy.

Other potential buyers lie on the doorstep of the United States in Latin America, where it could be used as a substitute for naphtha as a diluent for heavy crude oil.

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