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Editorial comment

US energy self sufficiency has been a topic of discussion for a long time, and now that shale oil and gas are on the scene, it appears that this scenario could become reality.

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Advancements in horizontal drilling and hydraulic fracturing have unlocked vast reserves of previously unattainable oil and gas. Shale oil is a light sweet crude, which can be very light, and the US oil industry is taking full advantage from infrastructure to refining. Both rail and pipeline infrastructure is being utilised to the max in order to ship this crude to the major refining hubs. However, when it does in fact get to its final refinery destination, is there the capacity to process such vast quantities?

The age of light sweet crude was thought to be drawing to an end in the 2000s, so many refineries increased their complexity and spent vast sums of money on upgrading infrastructure to include hydrocracking and coking facilities. As a result, many plants are no longer configured to process such light crude and this can result in lower efficiency levels and processing capacity, as well as making some units at certain facilities completely redundant. Also, shipping so much light sweet crude to US refineries for processing creates a problem for distillate production levels. With such an abundance of light crude available, refineries are likely to blend it with heavier crudes, therefore creating a gap in demand and supply levels for distillates. Does this mean that there is still room in the US downstream industry for foreign imports?

The above question can possibly be answered pretty quickly. Yes, heavy crudes will of course still be needed, however, there has been a drop in imports from over seas, especially Nigeria and Angola. The supply has been coming from the Canadian oilsands due to the increase in pipeline and rail infrastructure volumes in the US (as mentioned above) and the fact that oilsands projects such as Saskatchewan have reached the point of production. Even though the majority of heavy crude being supplied to the US is imported from Canada, it is an immediate neighbour so does contribute to the self sufficiency of North America as an entire continent.

Whilst I have voiced some reservations about the refining industry and the fast paced increase in sweet crude as a feedstock, an article in the Financial Times has said that ‘the US refining industry has been enjoying a remarkable revival’, due to the cheaper price of domestic sweet crude and the fact that, ‘up until recently, oil was imported, refined on the coast and then transported inland. Now the crude is being produced inland and sent to the coasts and it’s a gold mine for the refineries that have access to it.’ Of course, this is not something to disregard, however, there is always the fact that the refining industry is cyclical due to fossil fuels being a finite resource and ‘even if the shale boom persists, the boost it gives to refiners may not last too much longer.’