Americas News
Shale Oil Puts U.S. Fuel Oil Production in Doubt
As U.S. crude oil production moves away from traditional resources and toward shale, the level of fuel oil production is in doubt, Platts reports.
Some refineries on the Gulf Coast are reported to now be getting up to 60 to 70 percent of their crude oil from Eagle Ford shale, which is a lighter oil that produces less fuel oil.
"In a situation where we are restricted on exporting crude oil and are growing crude oil production...prices will get cheaper, enough that you will have to displace waterborne exports," said Andrew Lipow, president of Lipow Oil Associates.
"We've seen that in the interior of the country already, in North Texas and the Dakotas."
Turner Mason analyst John Auer said while shale oils are lighter than other crude oils, they are also varied in the amount of heavier products they can produce.
"The Eagle Ford condensate has no fuel oil, while some of the heavier stuff might have 10 or 20 percent at the bottom of the barrel," he said.
Because the Gulf Coast is the major region for U.S. fuel oil production, supplying more than half of the 481,000 barrels per day produced overall in the country, the switch could affect the nation's supply of fuel oil.
On the other hand, projects including the proposed Keystone XL pipeline, which Canadian officials hope to get started in 2015, are expected to bring heavy sour Canadian crude to the Gulf Coast, which could allow for the production of more fuel oil.
"We will ultimately, certainly by the second half of the decade, have heavy Canadian crude moving to the US Gulf Coast and then we will have a plethora of heavy crude there," Auer said.
