U.S. refineries are capable of processing all the light, sweet crude expected from domestic shale plays through 2016, according to a new survey by the American Fuel and Petrochemical Manufacturers (AFPM). The survey respondents — which AFPM said represent 61% of U.S. refining capacity — plan to increase their use of super light crude oil by more than 730,000 barrels per day between 2014 and 2016. Those refineries have the capability either in place or in progress to process an additional 800,000 barrels per day in 2016. The Energy Information Administration projects super light oil production in the lower 48 states to increase by 720,000 barrels per day from 2014 to 2016.
Inadequate delivery infrastructure and the favorable economics of processing heavier types of crude make it unlikely that domestic refineries will process all U.S. super light crude. AFPM acknowledged that logistics are still lagging behind the recent boom in U.S. oil production. Existing distribution infrastructure is too far from high production areas such as North Dakota and was not designed to handle increased flows from regions such as the Permian Basin and the Eagle Ford shale. Refiners have invested in rail unloading facilities, tank cars, pipeline changes and other transportation, but those options have limitations due to high operating costs, limited availability and safety concerns.
AFPM said while U.S. refiners have historically invested in processing heavy high sulfur crude from countries such as Mexico and Venezuela, this does not physically prevent them from processing more light crude. The high naphtha and paraffin wax content of tight oils, however, may require refining changes or investments. U.S. refineries have absorbed domestic light oil by replacing light and medium gravity oil imports, increasing overall refinery utilization and investing in modifications.
AFPM said the survey respondents are putting more capital into improving their access to U.S. crude than into any other area.
MORE REFINING NEWS: Marathon to integrate Texas City, Galveston Bay refineries
