International Energy Agency Forecast - USA Becomes A Net Oil Exporter?

[jyl]

Interesting forecast by IEA.

If the first bolded part below is true, it will have been accomplished fully within the existing framework of US environmental regulations and without resort to "Drill Baby Drill"-style gutting of said regulations.

If the second bolded part is true, US consumers who crave lower oil prices will be even more frustrated than they are today, as the USA achieves the long-dreamed of "energy independence" and yet oil and gasoline prices are as volatile as ever.

Note this IEA forecast is being disputed by pretty thoughtful people, and IEA hasn't been infallible in its past forecasting. Shale oil wells don't last long, production drops very rapidly, so new wells must be drilled at a rapid pace.

IEA World Oil Outlook - Executive Summary
http://www.iea.org/publications/freepublications/publication/English.pdf

The recent rebound in US oil and gas production, driven by upstream technologies that are unlocking light tight oil and shale gas resources, is spurring economic activity – with less expensive gas and electricity prices giving industry a competitive edge – and steadily changing the role of North America in global energy trade. By around 2020, the United States is projected to become the largest global oil producer (overtaking Saudi Arabia until the mid-2020s) and starts to see the impact of new fuel-efficiency measures in transport. The result is a continued fall in US oil imports, to the extent that North America becomes a net oil exporter around 2030. This accelerates the switch in direction of international oil trade towards Asia, putting a focus on the security of the strategic routes that bring Middle East oil to Asian markets. The United States, which currently imports around 20% of its total energy needs, becomes all but self-sufficient in net terms – a dramatic reversal of the trend seen in most other energy- importing countries.

No country is an energy “island” and the interactions between different fuels, markets and prices are intensifying. Most oil consumers are used to the effects of worldwide fluctuations in price (reducing its oil imports will not insulate the United States from developments in international markets), but consumers can expect to see growing linkages in other areas. A current example is how low-priced natural gas is reducing coal use in the United States, freeing up coal for export to Europe (where, in turn, it has displaced higher- priced gas). At its lowest level in 2012, natural gas in the United States traded at around one-fifth of import prices in Europe and one-eighth of those in Japan. Going forward, price relationships between regional gas markets are set to strengthen as liquefied natural gas trade becomes more flexible and contract terms evolve, meaning that changes in one part of the world are more quickly felt elsewhere.

[onewhippedpuppy]

I'm interested about this phrase: "starts to see the impact of new fuel-efficiency measures in transport"

I assume this is in reference to the new CAFE standards of a 54.5 MPG average by 2025? If they are assuming that all vehicles are meeting this somewhat deceiving standard by 2025 therefore cutting our current gas consumption numbers by more than half, they may be misusing that government guideline. The odds of the national average MPG being 54.5 MPG by 2025 are slim.

Regardless, I hope they are correct. Net exporter means we control our own destiny, and can hopefully extract ourselves from that hellhole called the Middle East.

[sammyg2]

Lots of talk about this subject in the industry.

One thing they won't tell you is, The long term plan of the current "group" is to eliminate the domestic refining business and force it over-seas. That process is already well underway.

If we can't process the crude oil here, of course we'll have to export it.
BUT ..... and that's a really big BUT .... we'll still have to import the finished products at greatly elevated prices.
Eliminate the American jobs, force them to go to India and indonesia, and then pay lots more for a product that used to be made here. What could go wrong with that plan?
Our entire economy wouldn't be at risk if most of our gasoline and diesel is being shipped across the ocean in realy large slow-moving boats, right?
We would never have to worry if most of our fuel is being made in very large stationary refineries (aka targets) in places that have absolutely no security, right?

Guess they conveniently left that part out of the press release.

[red-beard]

Originally Posted by sammyg2

Lots of talk about this subject in the industry.

One thing they won't tell you is, The long term plan of the current "group" is to eliminate the domestic refining business and force it over-seas. That process is already well underway.

If we can't process the crude oil here, of course we'll have to export it.
BUT ..... and that's a really big BUT .... we'll still have to import the finished products at greatly elevated prices.
Eliminate the American jobs, force them to go to India and indonesia, and then pay lots more for a product that used to be made here. What could go wrong with that plan?
Our entire economy wouldn't be at risk if most of our gasoline and diesel is being shipped across the ocean in realy large slow-moving boats, right?
We would never have to worry if most of our fuel is being made in very large stationary refineries (aka targets) in places that have absolutely no security, right?

Guess they conveniently left that part out of the press release.

I have wondered why Mexico doesn't build more refineries and export gasoline and finished hydrocarbons to the US.

[jyl]

Originally Posted by sammyg2

Lots of talk about this subject in the industry.

One thing they won't tell you is, The long term plan of the current "group" is to eliminate the domestic refining business and force it over-seas. That process is already well underway.

Point us to some evidence of this?

[jyl]

Looks like US operable refining capacity has risen steadily over the past 2 decades. It dipped a little this summer, perhaps that reflects the Richmond fire?

U. S. Operable Crude Oil Distillation Capacity (Thousand Barrels per Calendar Day)

Utilization rate of that capacity was pretty weak for a few years there, though it has come back up somewhat.

[red-beard]

Originally Posted by jyl

Looks like US operable refining capacity has risen steadily over the past 2 decades. It dipped a little this summer, perhaps that reflects the Richmond fire?

U. S. Operable Crude Oil Distillation Capacity (Thousand Barrels per Calendar Day)

Utilization rate of that capacity was pretty weak for a few years there, though it has come back up somewhat.

What you are missing is that the new California Cap and Trade system will shutdown the California Refineries.

[sammyg2]

Red-Beard has it right, there are currently three signiciant refineries in California up for sale and another that is up for possible "disposition" (shut down or turned into a shipping and recieving terminal).
There is another refinery in Hawaii that has been up for sale for a long time (1 of 2 there).

The reason these refineries are up for sale or are under threat of closure is directly related to excessive gubmint regulations and fees.

For perspective, there are only 9 refineries in California that have a capacity of 100k bbls or more/day. 100k is considered a relatively small refinery.
There are 11 other smaller refineries in Ca, most in the 50k range or smaller.
Many of them operate on a batch system mode and are up and down contantly as market conditions fluctuate. They will pretty much disapear in the next 5 to 7 years.

Of the roughly 2 million bbls of refining capacity in California, the refineries up for sale or disposition represent about 553,000 or 28%.

As cap and trade in califorinia progresses it will get more and more expensive to operate here every year.
Eventually most or all refineries will close down here.

[sammyg2]

This article was written 6 years ago and have proven to be almost prophetic:

Giant oil refinery in India shows forces roiling industry
August 29, 2006 12:00 am
By Steve Levine and Patrick Barta / The Wall Street Journal

JAMNAGAR, India -- For one billionaire and 150,000 manual workers here on the Indian seacoast, America's gasoline-thirsty motorists mean opportunity.

The drivers want more gasoline. U.S. companies that refine it from crude oil are minting money. But they have turned away from building new refineries in the U.S. because the numbers work better abroad, where costs and red tape are reduced and where expected demand growth is even higher than the U.S.

Into that economic mix sailed Mukesh Ambani, the chairman of India's largest private-sector company, Reliance Industries Ltd., a man whose animated personality and estimated $7 billion fortune regularly land him on the front pages of Indian newspapers. On India's northwest coast near Pakistan, Mr. Ambani is building the world's largest refinery complex. When it's finished, he plans to load 40 percent of the fuel it turns out onto huge tankers for a 9,000-mile trip to America.

The potential for oil refineries abroad that can serve the U.S. is so strong that Chevron Corp., though based in the car-happy state of California, is investing in Mr. Ambani's project rather than try to build a new refinery at home.
...............
While in the past, thinner profit margins required that refineries be close to consumers to save on shipping, today's margins are wide enough that it pays to haul gasoline and other refined products long distances. Locating refineries in a region such as Asia is an easy decision, given its less-onerous construction costs, environmental limits and red tape, plus its own rapidly growing fuel demand.

The hefty profits have spurred many new projects. Scottish oil consultancy Wood MacKenzie counts 500 plans to expand or build refineries world-wide, and figures that maybe half will actually get done. Few are in the U.S. Despite considerable expansion and upgrading of existing American refineries, oil companies haven't built a new refinery from scratch in the U.S. in 30 years.

........................
Saudi Arabia's national oil company, Saudi Aramco, currently envisions two giant new 400,000-barrel-a-day refineries. ConocoPhillips is in talks to build one, and France's Total SA the other. In addition, Saudi Aramco and Exxon Mobil are talking about being partners in a refinery expansion and petrochemical complex in China's Fujian province, near Taiwan.

Mr. Ambani's project in India is among the most ambitious. At $6 billion, it is in keeping with a tradition at Reliance Industries of proposing massive projects and getting them built.

While calling himself "media-shy," the 49-year-old Mr. Ambani isn't entirely modest in his claims for his business. He says just two companies in the world are comparable in building vast projects from scratch -- "only Microsoft and Reliance."

Mr. Ambani's father, Dhirubhai Ambani, founded Reliance in the 1970s as a textile producer. In the 1990s, the company plunged into oil refining after the younger Mr. Ambani noticed that India was importing millions of tons of oil products each year. Reliance soon built one of the world's largest refineries at the Jamnagar site, one that can process 660,000 barrels a day of crude oil.
The plant is also one of the most sophisticated, able to process heavy crude, an advantage not only because light, sweet crude is getting harder to come by but also because heavy crude is cheaper.

Reliance put up the refinery on time and within budget. When it was complete in 2000, it let India meet its fuel demands domestically and become a net exporter of refined products. Reliance pumps a little of the crude for the plant itself and buys much of what it needs from the Middle East.

The job of building at Jamnagar entailed another over-the-top project. To attract foreign experts to live and work at the arid site, the Ambanis built a residential complex that included villas for 2,500 families, a nine-hole golf course, a large swimming pool and an irrigated, 2,000-acre farm with 100,000 mango trees, guava and a flavorful fruit called chiku.

Mr. Ambani soon was mulling an expansion: a second big refinery alongside the first. But the death of his father, the founder, led to a bitter struggle between Mukesh and his younger brother, Anil, over the company's direction.

During this difficult period, 2003, Chevron happened to be installing a new head of its own refining arm. Chevron's refinery operation was lagging. Consultants told the company it was underperforming others. The new refinery chief, Jeet Bindra, a native of India, decided to go see an old acquaintance: Mr. Ambani.

After a visit by Mr. Bindra to Reliance's refinery in Jamnagar, the two companies agreed they would cooperate on some research projects. Chevron began to sell crude from its Asian oil fields to Reliance.

The Ambani brothers settled their differences in 2005, dividing Reliance into two parts, with one brother in charge of each. Mukesh, with the oil portfolio, resurrected his plan to expand Jamnagar.

Again, the vision was large: a 582,000-barrel-a-day refinery next to the one just built. It would have even greater ability to process heavy crude and make the most expensive types of fuel. Together, the plants would create the largest refinery complex in the world, able to process 1.2 million barrels of oil a day.

With refining profits currently high and many other projects under way, speed was of the essence. Oil analysts say that in five or so years, there is likely much new capacity, especially in Asia, while U.S. demand growth slows. Among the reasons analysts expect the growth in U.S. gasoline demand to slow are increased use of alternative fuels such as ethanol and wider adoption of gas/electric hybrid cars. The result may be that refining profit margins decline and the new plants will be fighting one another for sales to the U.S. "These projects will face tremendous competition," says Lawrence Goldstein, president of the Petroleum Industry Research Foundation.

Mr. Ambani is pushing to get the second refinery functioning while the profit window is open. He's speeding it along in part by using an extra-large work force. The goal is to have the plant on line by December 2008, two years ahead of many projects that others are planning.

Early this year, Mr. Ambani began hearing from Western and Mideast oil companies about becoming a partner in the project. He was interested, because Reliance had little marketing expertise and had to sell its output to traders, leaving some potential profits on the table. A partner could provide the missing piece.

That's where Chevron fit in. The U.S. company had planned small expansions of existing refineries in Mississippi and California but had identified no "grass-roots project in the U.S. that makes economic sense," Mr. Bindra says. By March 28, senior Chevron executives, including Chairman and Chief Executive David O'Reilly and Mr. Bindra, were meeting with Mr. Ambani at Chevron's offices in San Ramon, Calif. Over a lunch catered by a local Indian restaurant, they came close to a deal for Chevron to own part of the new refinery.

Mr. Ambani worried that Chevron couldn't act fast enough. To help with financing, he was planning an initial public offering of part of the new refinery, and this IPO was just two weeks away. To speed matters, Chevron suggested splitting its investment into parts. It would buy an initial 5 percent share for $300 million and have an option to buy a further 24 percent when the refinery is finished, for a total 29 percent interest.

Majority-owner Reliance would shoulder the risk of completing the project on time and on budget. Twenty percent would be sold to the public in the IPO, and Reliance would own the rest. The April 12 IPO drew bids for seven times as many shares as were available.

Twenty thousand workers are at the coastal site now, beginning the refinery's superstructure, despite the start of India's monsoon season. Their numbers will eventually reach about 150,000. The goal of fast construction is the reason for using so many, says crew chief Sridhar Vaidyanadhan. To avoid wasted time, he says, each welder will have a half-dozen helpers, "so he is always welding and the others bringing him what he needs."

Says Mr. Ambani: "We are building the refinery at half the cost and in half the time" possible in America. "I don't know that you could get 150,000 people together to build a refinery" there.

Skilled workers such as the welders will earn around $8 a day. The far-more-numerous laborers and helpers will get $3 a day or so, Mr. Vaidyanadhan says. The pay scale and certain economies, such as using the original engineering plans from the first refinery, are intended to keep the construction cost low. The project is supposed to cost just $10,300 per barrel of refining capacity, about a third lower than the estimated cost of building the two big refineries planned for Saudi Arabia.

About 80 percent of the gasoline and other products the refinery turns out will go to the U.S. and Europe. At today's rates, shipping to the U.S. will cost roughly $6 a barrel, a sum easily absorbed by the current high profit margins for refining.



Read more: Giant oil refinery in India shows forces roiling industry - Pittsburgh Post-Gazette

[RWebb]

54.5 MPG is a fleet avg., not a minimum or maximum

[sammyg2]

BTW, refineries in California are the cleanest operating refineries in the world by a far margin. Refineries in third world countries are just the opposite.
Here we have to make sure we have zero hydrocarbon leaks over 500 parts per million.
Over there if it isn't on fire or cutting production it isn't considered a bad leak.

Closing down the cleanest refineries in the world and transfering that operation to dirty refineries makes a whole lot of sense in regards to that whole global warming thing.
Such is the ridiculousness of that movement.

[red-beard]

Originally Posted by sammyg2

BTW, refineries in California are the cleanest operating refineries in the world by a far margin. Refineries in third world countries are just the opposite.
Here we have to make sure we have zero hydrocarbon leaks over 500 parts per million.
Over there if it isn't on fire or cutting production it isn't considered a bad leak.

Closing down the cleanest refineries in the world and transfering that operation to dirty refineries makes a whole lot of sense in regards to that whole global warming thing.
Such is the ridiculousness of that movement.

How often do they blow up? We get one blow up every 5 to 10 years...

[sammyg2]

Originally Posted by jyl

Point us to some evidence of this?

October 19, 2012, 6:42 PM.
Valero Shopping Its Two California Refineries.
By Ben Lefebvre, Ryan Dezember and Tom Fowler

Valero Energy Corp. is putting its two California refineries on the
block, attempting to exit the state ahead of a ratcheting up of air-pollution
regulations, people familiar with the matter said.

San Antonio-based Valero has enlisted Citigroup Inc. to help find a buyer
for the facilities, these people said, adding that the process is in the early
stages.

Valero, one of the largest refiners in the U.S., operates a
78,000-barrel-a-day refinery in Wilmington outside Los Angeles and a
132,000-barrel-a-day refinery in Benicia, in the San Francisco Bay area.
Together the plants represent about 10% of the company’s U.S. refining capacity.

A Valero spokesman declined to comment. A Citi spokesman also declined to comment.

Valero Shopping Its Two California Refineries - Deal Journal - WSJ

[sammyg2]

Originally Posted by red-beard

How often do they blow up? We get one blow up every 5 to 10 years...

You also have a whole bunch of them in that area, one of the most concentrated refining regions in the world.

The first refinery I worked at was a small low-budget POS that caught fire on average ever 14 months. It did not last that long and is gone now.

The last refinery I worked at did not have a fire or explosion in the 9 years I was there.
IIRC it hasn't had a fire since the early 90's.

In the 7 years I've been at my current refinery we've had one fire and no explosions. The fire was due to a dumarz doing something dumb (IMPO).
He isn't here anymore.


But make no mistake it is a very dangerous business.
Imagine an incredibly large volume of extremely flammable product, at times reaching 900 degrees and sometimes under as much as 2400 psi, rushing through a maze of hundreds of miles of pipes and tens of thousands of valves in a refinery.
Throw in a few hundred million SCFM of hydrogen at 2000 psi, 20 or 30 giant heaters and boilers, and it can be a recipe for disaster.

But the people who run these facilities in the U.S. do so responsibly and with great care and pride. If they don't they or their co-workers could get burned up and die.

Much less so overseas where the guys opening and closing the valves are making less than a dollar an hour and have zero edumacation. They have lots of workers in India.
If a few dozen get killed they have plenty more to replace them with.

And we all know how environmentally conscious there are in India, one swim in the Ganges river can show you that ....

[RWebb]

it's an even more dangerous business when you illegally reroute internal pipelines in the refinery to avoid pollution control equipment

[red-beard]

When I worked at a Powerplant installation in India, most of the workers didn't have shoes. You also had to bring your own safety gear. Welders shared a helmet, if they used one as all. A lot of the welders shielded their eyes with their other hand.

[Noporscheform]

Had an operating manager at a refinery tell me " if they were easy to blow up it would be happening all the time".

Refineries are very stable operations with fire/explosion risks only an outcome of poor maintenance or process procedures. A good operating company controls the exposure by using good procedures in all areas to reduce exposure to accidents or equipment failure.

There is no intent to eliminate refining in the US. Any number of companies have just recently invested many billions in updating equipment and expanding capacity at existing plants. There is even a grass roots refinery under consideration in the Dakotas.

Even California has buyers for the refineries that are for sale. Every operator uses there own criteria to manage the portfolio of facilities, selling some to buy others. Recently MPC sold an upper Midwest plant and is buying the BP plant in Texas. BP sold its California plant just within the last six months.

The talk of the refinery industry moving overseas has been around for the last 25 years. It's all economics, and supply vs. demand.