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ENERGY BRIEFS: Biodiesel / Mexico / Shale Oil / EIA Predictions

Screen Shot 2013-12-12 at 2.13.13 PMEnergy Commission Offers $5 Mil To Bako’ Biodiesel Co

At their December 19 meeting the California Energy Commission will be approving  CRIMSON RENEWABLE ENERGY for a $5 million grant to upgrade equipment at its existing facility near Bakersfield to increase biodiesel production from 10 million gallons per year to 17 million gallons per year and reduce the carbon intensity of the biodiesel produced to less than 14 grams of CO2 equivalent per megajoule.

Screen Shot 2013-12-12 at 2.17.00 PMMexico To Allow Foreign Firms To Produce Oil

A vote in the Mexican legislature this week will end that country’s  75 year state monopoly  on development of its oil industry. Pemex, the national oil company has seen a drop in oil production of 25 % since it peaked in 2004.
The new law is expected to allow joint ventures for companies like Exxon Mobil to develop the country’s vast oil reserves both in the Gulf and  on land where shale oil might be tapped.The bill was backed by President Enrique Pena Nieto’s ruling Institutional Revolutionary Party. A financial report says that “the government says an energy overhaul would lift economic growth 1 percentage point by 2018 and reverse oil production losses.”

California’s Shale Oil May Not Be All Its Cracked Up To Be

Oil analyst Daniel Yergin is throwing cold water on the idea that California is poised for a new oil boom based on developing the Monterey Shale reserves in the San Joaquin Valley. Yergin’s firm  predicted last December  that returns may not be as big as imagined in a number of press reports. The SF Chronicle said ”A report issued last December by IHS CERA predicted that unconventional oil production in California – oil coming from shale formations – would have a negligible impact on the overall amount of petroleum pumped in the state through 2020.”

U.S. Exports of Distillate Fuel Rise 30% On Global Demand

The federal Energy Information Agency says U.S. exports of distillate fuel (mostly diesel) reached a monthly record of 1.4 million barrels per day in July, and averaged more than 1.3 million bbl/d during third-quarter 2013 . This level is up 30% from 1.0 million bbl/d during third-quarter 2012 and from 0.3 million bbl/d during that period in 2007.
“Almost all of this growth was driven by economic expansion in the emerging economies of the non-OECD countries. Distillate fuel use tends to be highly correlated with economic growth, especially in manufacturing” says the EIA.

“This global distillate demand growth has helped support U.S. refinery runs. U.S. refiners increased distillate exports in recent years partly because of the smaller domestic distillate market; however, exports have increased by more than demand has declined, and even with modest U.S. demand growth in 2013, exports have continued to increase. Increased distillate exports reflect the competitive advantage of U.S. Gulf Coast refiners, which have supplied almost 80% of U.S. distillate exports during the first nine months of 2013.”

 

Screen Shot 2013-12-12 at 2.10.01 PM

Oil Boom on Rails –  Who Needs Pipelines?

Oil is riding the rails across the country including to refineries on the West Coast.

Oil shipments by rail are up  are up 20% this year says the Assn of American Railroads. The Bakken oil boom would be bottle necked with a lack of pipelines capacity prompting the building of twenty new rail load terminals in North Dakota with nearly 1 million b/d of capacity in 2012.
A recent  report said that “US crude-by-rail shippers also adopted economies of scale by utilizing “unit” trains with 100 or more dedicated RTCs, reducing the freight cost compared with traditional smaller loads carried in manifest trains mixed with other freight. Data from the North Dakota Pipeline Authority show rail shipments of crude out of North Dakota carried 70% of production volumes by April 2013.”

All of this is fine with rail companies like BNSF and UP. These railroads are  eager for the traffic since coal deliveries, which accounted for 45% of US rail traffic in 2011, fell by nearly 11% last year as natural gas eroded coal’s share of power generation.  Meanwhile oil shipments by rail grew by 46% in 2012 says  the same report.

Fuel ethanol already rides the rails.

In California a proposed Valero Crude by Rail Project would allow the  Benicia refinery to take delivery of up to 70,000 barrels of North American crude oil each day.  On the Central Coast,SLO County is processing a permit to build a new rail spur near Nipomo/Santa Maria Phillips 66 refinery involving unloading of up to five unit trains per week – 80 cars each- with an annual maximum number of trains expected to be approximately 250 carrying 52,142 barrels of crude per day..”The feedstock would be sourced from oilfields throughout North America based on market economics and other factors. The most likely sources would be the Bakken field in North Dakota or Canada” says the SLO County EIR.
In Kern County the  Bakersfield Californian recently reported that “A pair of rail terminals planned near Bakersfield may soon give Kern County a central role in California’s shift from heavy reliance on foreign oil to greater use of domestic sources. Separate projects by Plains All American Pipeline LP and Alon USA Energy Inc. would offload a combined 220,000 barrels per day — providing 13 percent of the state’s current oil consumption compared to the less than 1 percent California now gets by rail — and redirect most of that into pipelines leading to Los Angeles County and Bay Area refineries.”

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Screen shot 2012-06-09 at 7.35.08 AMGovernment Report: US Oil Production To Rise to 8.5 Million BBD In 2014  / Gas Prices To Fall Average 7 Cents In New Year

-After falling by more than 40 cents per gallon from the beginning of September through mid-November, weekly U.S. average regular gasoline retail prices increased by 8 cents per gallon to reach $3.27 per gallon on December 2, 2013, due in part to unplanned refinery maintenance and higher crude oil prices. The annual average regular gasoline retail price, which was $3.63 per gallon in 2012, is expected to average $3.50 per gallon in 2013 and $3.43 per gallon in 2014.

-The North Sea Brent crude oil spot price averaged near $110 per barrel for the fifth consecutive month in November. EIA expects the Brent crude oil price to average $108 per barrel in December and decline gradually to $104 per barrel in 2014. Projected West Texas Intermediate (WTI) crude oil prices average $95 per barrel during 2014.
-The discount of the WTI crude oil spot price to Brent, which averaged more than $20 per barrel in February 2013 and fell below $4 per barrel in July, recovered to an average of $9 per barrel in October and $14 per barrel in November. In addition, the spot discount of Light Louisiana Sweet (LLS), a key Gulf Coast light sweet crude oil, to Brent increased from an average of $3 per barrel in September to almost $11 per barrel in November. The opening of a large LLS discount to Brent and the increasing convergence of LLS and WTI prices result from pipeline expansions and reversals that have reduced bottlenecks in the Midcontinent, continuing growth in domestic light oil production, and a seasonal decline in crude oil runs at U.S. Gulf Coast refineries. Brent crude oil prices continue to be supported by ongoing supply outages in Libya and tightness in global light crude oil markets. EIA expects the WTI discount to Brent to average $12 per barrel during the fourth quarter of 2013 and $9 per barrel in 2014.

-Estimated U.S. crude oil production averaged 8.0 million barrels per day (bbl/d) in November, the highest monthly level since November 1988. EIA expects U.S. crude oil production will average 7.5 million bbl/d in 2013 and 8.5 million bbl/d in 2014.

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