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US refining CAPEX and shale crude production

Hydrocarbon Engineering,

A new report from GlobalData has forecast that the US is to spend US$ 4 billion on refining capacity expansion projects between 2014 and 2020, enabling it to process the increasing volumes of unconventional resource production. The report also states that the US will add 315 000 pd of new distillation capacity by 2020, which will equal 3% of the world’s total capacity increases.

Between 2014 and 2020, the US is expected to witness its largest annual refining capacity increase in 2015, when it will add 142 000 bpd from a number of projects, including the startup of a condensate splitter on the Gulf Coast. However, unlike other countries with mega refining projects, the forecast increase in US capacity results from relatively small refining projects, consisting primarily of hydroskimming and condensate splitter projects, configured to accommodate rising light sweet oil shale production.

Money talk

Carmine Rositano, Managing Analyst, Downstream Oil and Gas, GlobalData said, ‘the Dickinson, Mondak, Thunder Butte and Trenton projects are all located near to the Bakken field in North Dakota. These small 20 000 bpd facilities are now economically viable, refining Bakken crude that is priced at a discount to benchmarked crude prices and selling products into the local markets. Since processing discounted US crude oil and selling products into the marketplace has proved profitable, other small refineries that had been shut down can now reopen in areas where oil shale production is on the rise.’

GlobalData has said that US$ 1 billion will be spent on projects aimed at changing feedstock and crude oil supplies processed at several US refineries. These projects will allow specific grades of crude oil to be processed, therefore maximising refining optionality and profitability.

Rositano continued, ‘Valero is expected to invest over US$ 700 million to increase its refineries’ processing capabilities of light sweet crude oil produced from the Eagle Ford shale. This expenditure will include US$ 340 million at Corpus Christi and US$ 390 million at the company’s Houston refinery. Meanwhile, Husky Oil will invest approximately US$ 270 million to upgrade its 160 000 bpd Lima refinery, so that it can process approximately 40 000 bpd of Western Heavy Canadian crude oil. This will displace an equal volume of light sweet crude oil down to the Gulf Coast area.’

Adapted by Claira Lloyd

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