What do you get when you mix a diversifying, expanding oil infrastructure with a growing proliferation of new mostly, lighter sweet crude grades?
You get traders jumping in offering crude blending for hire.
Traders said the trend started a few months and has caught on. Growing production of North America crudes–from the heavy Western Canadian crudes in the north to the ultra-light sweets in the mid-Continent and South — have created more blending opportunities to make palatable mid-grade crudes for refiners from the “dumbbell” crudes, i.e., crudes from the ends of the gravity spectrum.
Refiners have always blended crude to meet the specific criteria for individual refineries, depending on the units as well as the time of year and whether they wanted the product yield to be more weighted to gasoline in the summer or distillates in the winter.
But the growth in production from the two main shale oil plays — the Bakken in North Dakota and the Eagle Ford in South Texas — has been so fast that infrastructure is still playing catch up, with new trains, rail and terminals being built at a record pace. But still some refiners are hard put to keep up with the new streams.
At the Texas port of Corpus Christi, 108 million barrels of crude — the majority of which was Eagle Ford — moved into the port, with about 43.7 million barrels moving out via rail, barge and truck up the coast to Texas and Louisiana refineries.
Several port customers, including Valero and Flint Hills, both of whom have sizable refineries in Corpus Christi, have started to blend Eagle Ford with foreign crude, said Frank Brogan, Managing Director of the Port of Corpus Christi, Texas.
“It has been a substantial growth as the Eagle Ford crude production has surpassed the ability of the local refineries to refine it,” said Brogan.
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The incredible rising North American crude production — both from the shale plays and heavy Canadian crude from the tar sands in Alberta–has created a massive volumes of crude with qualities not particularly suited for many refineries. This is particularly true of the light Eagle Ford, with can carry an API of 47.
Astute crude oil blenders jumped quickly into the gap, offering blending services to refiners and to traders as well. Swiss trading house Trafigura is said by traders to be one of the biggest players, with 600,000 b/d of storage already in use at Corpus Christi, soon to be expanded to 2 million barrels. And they are not alone. Other traders like Gavilon are said to be active as well.
Along Enterprise’s Eagle Ford pipeline’s Sealy, Texas transfer station is being used as a blending terminal. In Louisiana, Shell’s Sugarland, Louisiana terminal is also being used to blend.
Many refiners and blenders have found that mixing Eagle Ford crude with Mars, a medium sour grade from the Gulf of Mexico, creates an “Eagle Ford Cocktail” palatable to a majority of plants.
North Dakota Bakken is being shipped to the St. James, Louisiana in the Gulf of Mexico, but there is a push to move crude to both East and West Coasts and the refiners there.
PBF Energy already receives a goodly amount of Bakken as well as Canada’s Western Canada Select at its Delaware City, refinery via a new and efficient double loop rail system while Philadelphia Energy Solutions is waiting for the Enbridge’s Eddystone transshipment rail facility to come on line at the end of the year. That will give it the flexibility needed to blend more there, creating a new crude that is being dubbed “Philly Light.”