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Tuesday, October 23, 2018

Declining U.S. petroleum imports shift tanker focus to non-OECD countries




The United States is an important driving force, both in the crude and product tanker markets, but crude oil imports to the U.S. have been declining.


More and more, U.S. refiners are looking north to Canada for their crude, a trend that is prompting a large-scale reconfiguration of North America's oil transportation network, involving pipeline reversals, expansions and extensions. With the geography of the U.S. refinery business essentially rigid, the pipeline network is in the process of being modified to handle more Canadian crude and take advantage of Alberta's surging oil sands production. Pipeline reversal from northbound to southbound, capacity expansions and southern extensions — often as joint ventures between the majors and Canadian pipeline companies — will all be needed to get synthetic crude to the Gulf Coast as well as to traditional customers in the upper Midwest. And all of these refineries are likely to need modification in order to optimise the processing of Canadian syncrude into a product slate that will invariably get lighter and cleaner.


Some are beginning to wonder if it might be a question not of whether there will be enough pipelines, but of whether there will be enough oil supply, with the oil sands projects bogged down by rampant cost escalation, labour shortages and environmental objections, and new Asian players looking to move some synthetic crude west rather than south.


Midwestern refineries have been working with Canadian producers and pipelines to put together "cocktails" of synthetics, condensates and raw bitumen that can economically meet the product slate faced in the upper Midwest with existing equipment or with some minimal tweaking. On the Gulf Coast, Royal Dutch Shell and Saudi Aramco's 325,000 barrel per day Port Arthur refinery expansion should have plenty of room to take Shell's equity volumes from its Athabasca oil sands project and several other in-situ bitumen schemes.


According to the International Energy Agency (IEA), the long-term forecast for U.S. consumption of liquid fuels - including fuels from petroleum-based sources and, increasingly, those derived from non-petroleum primary fuels such as coal, biomass, and natural gas - totals 22.8 million barrels per day in 2030 in the reference case, an increase of 2.1 million barrels per day over the 2006 total. All of the increase is in the transportation sector, which accounts for 73% of total liquid fuels consumption in 2030, up from 68% in 2006. Gasoline, ULSD, and jet fuel are the main transportation fuels.

The reference case includes the effects of technology improvements that are expected to increase the efficiency of motor vehicles and aircraft, but the projected growth in demand for each mode outpaces those improvements as the demand for transportation services grows in proportion to increases in population and GDP. With the new CAFE standards in EISA2007, the transportation use of liquid fuels increases by 2.6 million barrels per day in the reference case, 3.9 million barrels per day in the high economic growth case, and 1.8 million barrels per day in the high price case from 2006 to 2030.


Consumption of liquid fuels from non-petroleum sources increases substantially over the projection period. Ethanol, which made up 4% of the motor gasoline pool in 2006, increases to 15.8% of the total motor gasoline pool in 2030. Total production of liquid fuels from coal to liquids (CTL) and biomass to liquids (BTL) plants, which are expected to commence operation in 2011, increases in the reference case to 0.54 mbd in 2030, equivalent to 9.7% of the total pool of distillate fuel.


The tanker industry has to rely on the non-OECD countries to provide the necessary driving forces for the tanker markets. Oil imports to the main OECD areas, the U.S., Europe and Japan, are declining or at best steady. These countries still represent more than 60% of total crude oil imports, compared to China some 8% and India some 5%.


Contact: Erik Ranheim