Crude Supply Creates Demand for Storage Projects on USGC

July 8, 2014 Kirk Eggleston

The largest new oil storage facility along the Texas Gulf Coast is slated for Houston, TX, according to the Wall Street Journal (WSJ).

The paper's blog identified Houston-based Haddington Ventures LLC, a midstream oil and gas investment firm, as the designer/builder for the Pierce Junction crude oil storage project. Currently, the company is seeking a buyer for a majority stake in the project, which has already been designed and is slated for construction in late 2014.

Since 2008, crude inventories from the tight oil and shale gas revolution, have been piling up in Cushing, Oklahoma, a major oil trading and storage hub. However, TransCanada's Gulf Coast Pipeline, which came online in January of this year, helped significantly reduce inventories in Cushing, but pushed the crude to the U.S. Gulf Coast (USGC) area. As a result, crude inventories in the USGC have recently climbed to record levels according to the Energy Information Administration (EIA), hitting 207.2 million bbl on April 11, 2014. The EIA says the USGC region has about 275 million bbls of current capacity, but projections are for total U.S. oil production to continue growing, and more midstream projects pushing oil to the USGC have been scheduled.

Haddington's Pierce Junction project, which will be in Southwest Houston, will utilize naturally existing salt domes in the area. The way it works is a well is drilled into the formation and large amounts of water are cycled through the well dissolving the salt. The brine is extracted, leaving a large empty space in the formation for storage purposes.

According to WSJ, a Houston investment bank predicts by 2016 projects along the Gulf Coast will accommodate an additional 55-million bbl. The Pierce Junction Project is included in that estimate.

Valero Refinery Expansions Pushed Forward by Eagle Ford Production Growth - $730 Million

January 31, 2014 Kirk Eggleston

Valero plans to build crude topping units at its Corpus Christi, TX refinery and its refinery in Houston.

The two expansions come with a price tag of $730 million, but will likely be needed if the growth of light-sweet crude oil from areas like the Bakken, Eagle Ford, and Permian Basin continue.

The company's plans include adding a 70,000 b/d unit at the Corpus Christi refinery at an estimated cost of $340 million and a 90,000 b/d topping unit in Houston at a cost of $390 million.

Valero announced plans to add the 90,000 b/d unit at its Houston facility at an estimated cost between $220 - $280 million early in 2013. According to Valero Spokesman, Bill Day, those costs are now projected at $390 million for the 90,000 b/d unit.

Eagle Ford Crude Oil Production Driving Refinery Expansions

Eagle Ford Crude has an API of 50 degrees, and Valero's refineries are accustomed to processing heavier crude from South America. As Valero's Eagle Ford production rates remain strong, the need for its refineries to process the light sweet domestic crude is the push behind both of these initiatives.

Additional production growth will likely lead to even more favorable pricing for domestic crude oil.

“The new units at these refineries will allow the plants to purchase less intermediate feedstocks from outside suppliers.”

— Valero Spokesman, Bill Day

Both refinery units are in the planning phase, so no construction has taken place, but the company intends for both units to be completed by the end of 2015.

Other Valero Downstream Projects in Texas

[ic-l]At the Valero's Three Rivers refinery, which sits atop the Eagle Ford shale, the company built a new pre-flash tower and added logistics in 2011-12 to process more light Eagle Ford crude.

Valero also plan expansions at the McKee Refinery in the Texas Panhandle. The project calls for spending $60 million to increase the crude unit from 170,000 bpd to 185,000 bpd, in order to process more Permian Basin crude.

Magellan Midstream Buys West Columbia Pipeline From Shell

September 16, 2013 R.T. Dukes

Magellan Midstream Partners has acquired a 15-mile, 16-inch Houston area pipeline from Shell. The pipeline is bi-directional, with capacity of 150,000 b/d.

The pipeline moves crude from Genoa Junction to/from a Magellan terminal in East Houston.

The company stated, "The West Columbia pipeline will provide an additional route for crude oil, particularly barrels from the Eagle Ford, to reach our East Houston terminal for storage or subsequent delivery into Shell’s reversed Ho-Ho system."

The 300,000 b/d Ho-Ho system allows for connection to refineries in Louisiana. Read more about Shell's reversed Ho-Ho system in the article - Shell Reversing Houma to Houston Pipeline

Neither Magellan Midstream nor Shell released the financial details of the transaction.

Calfrac Acquires Eagle Ford Assets With Mission Well Services Deal - $147 Million

September 10, 2013 R.T. Dukes

Calfrac Well Services has agreed to acquire Eagle Ford service company Mission Well Services for $147 million.

Mission Well Services is a privately held hydraulic fracturing and coiled tubing service provider in Texas. With the acquisition, Calfrac gains locations in Fairfield, Houston, and San Antonio.

“Mission provides a platform for Calfrac to enter the Eagle Ford shale region and to assess opportunities in other basins in Texas, while adding high quality fracturing and coiled tubing equipment to other Calfrac operating areas.”

— Doug Ramsay, CEO of Calfrac

The deal includes:

157,500 of conventional pumping horsepower
High rate blenders
Sand handling equipment
Three deep capacity coiled tubing units with related fluid and nitrogen pumping units
Modern office and yard in San Antonio, TX

Charlie Leykum, Chairman of Mission, stated "We think the transaction is an exciting development for our team at Mission and it is the culmination of three years of hard work, from inception as a greenfield development to a thriving, multi-district pressure pumping company. We look forward to introducing Calfrac to our customers and vendors in the Eagle Ford and surrounding markets."

Calfrac is based in Calgary, Canada, and has operations in Canada, the U.S., South America, and Russia. The acquisition brings the company's total pumping capacity up to 1,181,500 horsepower.

Read the full press release at calfrac.com

Eagle Ford Shale From Space - Updated NASA Photo

July 9, 2013 R.T. Dukes

A new Eagle Ford Shale satellite photo from NASA shows just how many rigs are active in the area. At the time the photo was taken there were about 260 rigs drilling in the area. Eagle Ford rigs account for almost 15% of all drilling in the U.S.

The Eagle Ford accounted for more than 10% of oil production in the U.S. in April of this year. The play has grown from producing virtually nothing in 2008 to more than 800,000 b/d of oil in early 2013.

For reference, metro area populations are noted below:

Dallas-Fort Worth - 6.5 million
Houston - 6.1 million
San Antonio - 2 million
Austin/San Marcos - 1.7 million