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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10 Proceedings Fall 2015 A barge (or rail) operator will sign a one-year con- tract. That's a major incen- tive when producers must concern themselves with t he of ten u npredictable nature of oil wells. All told, moving crude via barge can cost about half the price to move by railcar. A Look Ahead Since our nation has very large reserves of crude oil and natural gas, domes- tic production is unlikely to decline, other than in response to normal fluctuations in supply and demand. While LNG is not currently exported to any significant degree, LNG and HGL exports are likely to increase sub- stantially in coming years. Concurrently, LNG and crude oil imports are expected to decline. About the author: Mr. Rick Elliott, P.E., is the director of the Advanced Supply and Facilities Division within the Offce of Fossil Energy — Oil and Natural Gas at the U.S. Department of Energy. His division sponsors research and technol- ogy development programs that improve the nation's natural gas midstream infrastructure operational effciency. Endnotes: 1. Natural gas, as it leaves a production well, is a gaseous mixture of hydrocarbons of which the primary one is methane, but which also include ethane, propane, normal butane, isobutene, and natural gasoline. Natural gas is processed down- stream of production wells to remove most of the non-methane hydrocarbons by turning them into liquids. In liquid form, they are known as Natural Gas Plant Liquids (NGPLs). Processed ("pipeline-quality") natural gas is typically 95%–98% methane. 2. Early research and technology development work sponsored by the U.S. Depart- ment of Energy from the late 1970s to the 1990s helped spur private sector invest- ments and industry innovation in these technologies, which led to their eventual commercial success. 3. Michelle Thompson, "Right or Wrong," Riding the Rails — A Fourth Quarter 2014 Supplement to Oil and Gas Investor, Hart Energy. 4. John Fritelli, "Shipping U.S. Crude Oil by Water: Vessel Flag Requirements and Safety Issues," U.S. Congressional Research Service, April 21, 2014. 5. Deon Daugherty, "Barging In," Riding the Rails — A Fourth Quarter 2014 Supplement to Oil and Gas Investor, Hart Energy. Bibliography: U.S. EIA, Annual Energy Outlook 2014 Early Release Overview, December 2014. U.S. EIA, Hydrocarbon Gas Liquids: Recent Market Trends and Issues, November 2014. U.S. EIA, "Rail Delivery of Crude Oil and Petroleum Products Rising," Today in Energy, November 16, 2011. Gregory D.L. Morris, "Rail Comes of Age," Riding the Rails — A Fourth Quarter 2014 Supplement to Oil and Gas Investor, Hart Energy. This may result in more oil moving by costlier rail transport than otherwise would be the case. Despite these impediments, there is some interest in domes- tic tankers. One company spent almost $1 billion in 2013 to dive into marine transport of crude, acquiring two com- petitors. Its feet consists of fve medium-range Jones Act- qualifed tankers, each with a 330,000-barrel cargo capacity. In addition, the company has four similar tankers under commission for delivery in 2015 and 2016. 4 Barges In contrast to domestic tankers, shipping crude by barge is becoming quite popular. U.S. refnery receipts data refect that deliveries by barge more than doubled from 2005 (164.2 million barrels per year) to 2013 (345 million barrels per year). Crude oil from the Bakken area of North Dakota is delivered to St. Louis either via pipeline or rail and then is barged down the Mississippi River to any one of 19 refner- ies in Louisiana. Similarly, crude oil is delivered to the Port of Albany, New York, by truck, rail, or pipeline, and is sub- sequently barged down the Hudson River to reach refner- ies in Philadelphia. Less than a decade ago, the Mississippi River oil trade barely existed, with fewer than 100 barges, mostly operated by small private companies. Today, one Houston-based corporation alone operates 887 active inland tank barges, 161 active towing vessels, and fve feets. More than 1,500 mariners work for the company. 5 Barge traffc is less expensive than rail, and in some cases it is less costly than pipeline transport, since pipeline opera- tors typically demand long-term contracts (up to 20 years). U.S. Crude Oil and Lease Condensate Proved Reserves U.S. Total Natural Gas Proved Reserves Because of the ability to recover signifcantly more oil and gas from known deposits, U.S. oil and natural gas reserves estimates are increasing after long periods of decline, as depicted above. Chart courtesy of EIA, U.S. Crude Oil and Natural Gas Proved Reserves — 2013, December 2014.

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