EAI, Inc. has released its North American Shale Fairway (NASF) Crude Supply, Logistics, Refining and Pricing Outlook providing the most extensive information base, analytics and outlooks across all production areas, refining centers, transportation systems and pricing / distribution hubs that comprise and drive the NASF crude oil business. The geographical focus of this new EAI, Inc. study release extends from Western Canada southwest through the U.S. Rocky Mountains, U.S. Central Corridor and Gulf Coast. The EAI, Inc. North American Crude study team provides its latest integrated outlook for crude production, refining, logistics/transportation and crude pricing/supply economics across the NASF trade area. The NA Shale Fairway includes East Coast, West Coast and foreign offshore interactions.
Refining vs Production and Grade Shift
This area represents approximately 11.8 million BPD of refining crude runs and crude production totaling 8.4 million BPD in 2012. The NASF is undergoing major changes that have and will continue to create new opportunities and challenges across the crude production, logistics, refining and trading landscape. EAI, Inc.’s trademark bottom-up meets top down approach addresses all refining centers, production basins, basin take-away capacity and costs, crude balances and crude hub pricing across the NASF with linkage to East Coast and West Coast markets.
Production Outlook by Crude Basin and Grade
Total NASF crude production is forecast to increase by over 50 % from 8.35 million BPD in 2012 to 11.4 and 12.6 million BPD by 2016 and 2020 respectively. This includes over 1500 MBPD of heavy crude blends in Western Canada, 700 MBPD of medium sour from the U. S. GOM and the balance generally light sweet crude and some condensate. The primary contributors to the US NASF production gains include heavy and light production from Western Canada and light crude/condensate from the Bakken, Eagle Ford, Permian Basin, Granite Wash, Rocky Mountain Niobrara-DJ, Mississippi Lime and Utica development areas.
Supply, Distribution and Logistical Shifts: Take-Away Capacity Outlook
Over the next two years, there will be continued transportation challenges to move this growing crude supply to the appropriate markets as EAI, Inc. has defined by production basin , transport corridor and refining market. Additional take-way capacity is needed and/or underway across all of these production areas. In addition, overall corridor transport needs are expanding from Cushing-North supply areas to the Gulf Coast, Northeast and West Coast refinery markets.
Emerging Rail Transport Network for Crude Oil Detailed
Rail will play an increasing role in moving these crudes to higher valued markets with approximately 30 refinery/crude hub locations identified by EAI, Inc. either in operation or being developed. Total rail delivery capacity is expected to ramp up to approximately 750 MBPD by the end of 2012 and 1400 MBPD by 2014. Long haul rail is expected to play a continued role in crude transport as some traditional pipeline corridor markets hit their limits on capability and/or economics to absorb additional light crude supply.
Light Crude Length and North America-Global Impacts
The Light/ Medium NASF crude network is expected to transition from being logistically constrained to refinery-market constrained over the 2015 to 2017 timeframe as domestic supply displaces most if not all foreign marine supply coming into the Gulf Coast. NASF light incremental crude markets will require longer haul economics to expand access to the Eastern Seaboard and West Coast markets and crude grade substitution in the U.S. Gulf Coast. The grade substitution market includes direct displacement of medium grade crudes and effective blending with heavy grade crudes to meet refinery processing capabilities and a continued shift to a more diesel intensive product slate. This North American transition coupled with a slowing of global demand growth and continued closure of Atlantic Basin refineries will result in a growing light crude bubble on the order of 2-3 million BPD that will impact both global Brent crude pricing as well as the WTI Cushing crude price benchmark at Cushing.
West Texas-New Mexico Outlook and Implicatons for WTI Cushing Price Benchmark
Permian Basin crude supply, which includes the benchmark crude WTI stream, is undergoing dramatic shifts as part of these production-logistical dynamics that will have major and lasting change on the WTI benchmark value and potentially the focal point for distributing and trading WTI crude. EAI, Inc. is forecasting Permian Basin crude production to increase by over 45 % with some of this incremental crude more aligned with West Texas-New Mexico Super Sweet in quality. Although some of the WTI Cushing distress market discounting is expected to subside, EAI, Inc. is forecasting continued dynamics in the Cushing- Gulf Coast differential driven by
- long haul transportation economics setting well-head prices for northern crudes,
- increasing light crude penetration into the medium and heavy crude pools and
- downward pressure on global light crude pricing and Brent Crude prices laid into the U.S. Gulf Coast.
There will also be some “spill-over” effect on medium sour crude grade pricing with Gulf of Mexico ultra-deep production supply ramping up in parallel with the light crude push into the Gulf Coast medium grad crude market.
Subscribers to EAI, Inc.’s North American Shale Fairway program with receive the following deliverables:
- New crude oil production trends and highlights including Gulf of Mexico, Eagle Ford, Permian Basin, Bakken, Niobrara, Canadian oil sands projects and other key global production basins including Latin America.
- Five printed copies of the North American Shale Fairway study in its entirety
- Consultation on client specific topics and issues as long as they are within reasonable bounds of the original study Scope of Work
- Information and data support in Excel format
- Copies of the complete Executive Summaries, Business Component Summaries and information support tables on CD-ROM
- A formal presentation presenting the program results and addressing specific Client inquiries can be provided to the Client upon request