Wednesday, June 25, 2014

Shale Oil Is Very Volatile

Millions of barrels of crude oil flowing from shale formations around the country—not just North Dakota—are full of volatile gases that make it tricky to transport and to process into fuel.
Oil from North Dakota's Bakken Shale field has already been identified as combustible by investigators looking into explosions that followed train derailments in the past year.
But high gas levels also are affecting oil pumped from the Niobrara Shale in Colorado and the Eagle Ford Shale and Permian Basin in Texas, energy executives and experts say.
Even the refineries reaping big profits from the new oil, which is known as ultralight, are starting to complain about how hard it is to handle with existing equipment. Some of what is being pumped isn't even crude, but condensate: gas trapped underground that becomes a liquid on the surface.
The federal government says 96% of the growth in production since 2011 is of light and ultralight oil and that is where growth will continue.
The huge volume of this gassy new oil has created a glut, pushing prices to $10 or more below the level of traditional crude. Energy companies think they could get higher prices by sending the new oil abroad, which explains some of the push to lift a U.S. ban on exporting crude. Federal officials recently gave two companies permission to export condensate under certain circumstances.
This new crude can act like a popped bottle of Champagne, says Sandy Fielden, an analyst with consulting firm RBN Energy. "If it's very light, it froths over the top" of refinery units, he says. Many refiners "can't manage that in their existing equipment."
I never anticipated seeing refiners complain that crude was too light and too sweet.  Yeah, it's a damn shame our refineries were set up to run the sour shit coming out of the tar sands, and now we are getting too much light, sweet.  At least the producers can find refineries in other nations which can handle the easy to process shit.  Yeah, I have a hard time buying the, "this is too light and too sweet" line of bullshit.

I should note that producers are now admitting that this big boost in "crude" production actually includes a lot of natural gas liquids, which apparently work as a replacement for crude oil in industrial use, but not for diesel or gasoline production.  Keep an eye on production from the Eagle Ford and Bakken.  I would anticipate slower increases of production going forward as we approach peak production from these fields.  Early wells from the Bakken should be approaching the rapid decline portion of their production curve, so it will take more new wells to replace the peak production of the older wells.

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