Proceedings Of The Marine

FALL 2015

Proceedings magazine is a communication tool for the Coast Guard's Marine Safety & Security Council. Each quarterly magazine focuses on a specific theme of interest to the marine industry.

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17 Fall 2015 Proceedings www.uscg.mil/proceedings processes involved. A distinct constraint is the avail- ability of heavier crudes to blend with the lighter oil, since light oil production is outpacing the production for heavier crude oils. Canadian oil sands production addresses this need for heavier oil for blending and to facilitate optimal processing of U.S. light crude oil. Given that U.S. refners have invested heavily to accom- modate heavier crudes, processing only light oil produc- tion means ineffcient, suboptimal use of these plants. Consequently, blending U.S. light oil with Canadian oil sands product affords benefts across the oil supply sys- tem. However, until these effciencies are achieved, U.S. light oil producers are seeking export approval to de- bottleneck periodic light oil supply gluts. If an integrated U.S./Canadian oil system can be achieved, refners can take advantage of market condi- tions as needed to export petroleum products. Since the Gulf Coast hosts the largest concentration of oil storage, process- ing, and refning capacity with waterway access, coastal transshipment of various crude oil blends and petroleum products — already important components of the oil supply system — could facilitate transfer to other markets. Future Focus The U.S. Energy Information Administration forecasts that light, sweet crude production will continue to outpace that of medium and heavy crude through 2015, and more than 60 percent of the EIA's forecasted production growth for 2014 and 2015 consists of sweet grades with API gravity of 40 or above. 8 Current oil market conditions and lower prices are slowing crude oil production, but production of lighter oil fractions will remain a feature of the U.S. energy land- scape for some time. Midstream infrastructure operators will likely build more storage, processing, and pipeline capacity to handle these lighter crudes, and the downstream segment (refneries) will need access to heavier crude oil sources for blending. Finally, new carriage safety regulations for lighter, more volatile oil products will infuence investment decisions and feld operations, as well as feld-to-market connections. U.S. policies on exporting crude oil and certifying oil pipelines to carry Canadian oil sands production complicate the out- look. About the authors: Ms. Deniese Palmer-Huggins is the senior energy advisor at the Bureau of Economic Geology's Center for Energy Economics, University of Texas at Austin. Dr. Michelle Michot Foss is the chief energy economist at the Bureau of Economic Geology's Center for Energy Economics, University of Texas at Austin. Endnotes: 1. The U.S. Energy Information Administration, "Top 100 Oil and Gas Fields," April 2, 2015, found at www.eia.gov/naturalgas/crudeoilreserves/top100/. 2. Ibid. 3. Bakken mainly yields condensates, which are natural gas liquids that are in solu- tion in the production stream and removed in gas processing plants. 4. The U.S. Energy Information Administration, www.eia.gov/analysis/petroleum/ crudetypes/pdf/crudetypes.pdf. 5. The U.S. Energy Information Administration, "Today in Energy," June 6, 2014, www.eia.gov/todayinenergy/detail.cfm?id=16591. 6. North Dakota Petroleum Council, www.ndoil.org/resources/bkn/. 7. See www.phmsa.dot.gov/hazmat/regs/ntsb/rail. 8. See www.eia.gov/todayinenergy/detail.cfm. Crude Oil Assays Source: EPRINC: A Condensate Primer, Feb. 2015, found at www.eprinc.org.

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