The HIS Ceres conference each year brings out the royals and the rapscallions. From Nigerian oil diplomats to Chinese front men, from the Bigs to the Indies, they are all here.
Interesting how the Bigs are whining about massive capital costs for their projects: 35+ multi-billion dollar capital projects across the globe, from Kazakhstan to Namibia. The cost overruns result from labor and materials price increases beyond their budgets. Wonder why…they have been announcing these projects for a decade now. The service fellows listen, build, supply, and price according to demand. No secrets here. Vertically integrated decision making slows the time line down. Decade long projects get away from these mid-level folks who are often just trying to make a mortgage.
Meanwhile, the Indies are doing quite well, thank you. Spend $4-10M for a well in PA, ND, OK, TX or LA and you can see the return on capital flow in a few months, rather than a few decades. Slow and steady wins the race. Even BP has spun off its U.S. operations, acknowledging that the decision making and capital assignment process is different for small projects. While E&P may slow in 2014 as the U.S. industry catches its breath after six straight years of extraordinary capital growth and hydrocarbon flows, the midstream continues apace, connecting the dots of thousands of wells across America.
Refiners are reconfiguring their fractionators for the shale oil. Easier and cheaper to rework an existing operation than face the EPA with a new project. Another 400,000 bbls/d of refining capacity is being added this year. This is the output of a massive new refinery. The sweet, ultra light crude from the Eagle Ford is rich. Its fractionation is different than the heavies from abroad. Cheaper too, in the long run. Somewhat better for the environment as well (as if the enviros care). Splitters do a partial refine, then ship the product overseas for finishing.
Refiners along the Gulf and Atlantic coasts as well as in Kentucky and Illinois are adding capacity to accept our own crude. By the end of the decade, more than 1M bbls of new capacity will be added to existing refinery output.
UPS has announced the conversion of 1,000 trucks to CNG/LNG. This adds to the 900+ fleet of natural gas vehicles in Canada. Look for the methane powered cars to become more available for consumers this year and next. Without a dime from government coffers, this new industry is slowly emerging into the limelight. Truckers realize the savings. Shippers have the storage capacity and the new engines pay for themselves in three years or less.
CBR, crude by rail, is a growing aspect of deliveries from wellhead to refiner. It offers flexibility of crude type, delivery schedule and locale, as well as some pricing advantages. Most important, rail exists where pipe does not – the only game in town. Both will work together as new pipe is laid, but rail is here to stay. The rail industry is ahead of the curve on safety, more so than the government.