Shale's surge crashes into bottlenecks, from pipelines to ports

[thackney]

Shale's surge crashes into bottlenecks, from pipelines to ports
https://www.chron.com/business/energy/article/Shale-s-Surge-Crashes-Into-Bottlenecks-From-12953437.php
May 30, 2018

The U.S. shale surge is crashing headlong into a barrage of bottlenecks.

From West Texas pipelines to Oklahoma storage centers and Gulf Coast export terminals, the delivery system for American crude is straining to keep up with soaring production. That’s limiting the industry’s ability to take full advantage of growing worldwide demand, with U.S. barrels forced to take an almost $9-a-barrel price discount to international crude.

Barclays Plc analysts on Tuesday predicted “a new shock" for energy markets as a dearth of pipeline capacity near a key Oklahoma storage hub threatens the flow of oil. Pipeline shortages in Texas’ Permian basin, meanwhile, may not clear until late 2019. The problems undercut hopes American output will stabilize global prices as crude from Venezuela and Iran is increasingly at risk.

“When you’re forced to truck barrels about 500 miles to the Gulf Coast -- yes, that’s as inefficient as it sounds -- the price differential ‘blows out’ to levels seen recently," Raymond James & Associates analysts wrote in a Tuesday note....

[Weird Tolkienish Figure]

Guess we'll be seeing rail pick up the slack?

[thackney]

Guess we'll be seeing rail pick up the slack?

I was thinking the same thing.  Then pipelines will catch up again, just like what happened in North Dakota.

[IsailedawayfromFR]

For those interested in the history of the oil industry, this reminds me of the problem during early Spindletop days, then later on after the discovery in 1930 of the East Texas oilfield which was so prolific that it partially offset the Great Depression as oil price was sent below 10 cents per bbl.

The same infrastructure problems surfaced as there were few pipelines from fields to refineries.

Since most refining capacity was on the East Coast, it severely hampered the War effort by German submarines sinking tankers conveying crude from the Gulf Coast to the East Coast, causing the then-largest pipeline in the world to be laid between East Texas and Philadelphia refineries.

https://aoghs.org/petroleum-pioneers/east-texas-oilfield/
https://tshaonline.org/handbook/online/articles/doe01

Infrastructure problems were even greater outside the US, as one of the greatest petroleum companies ever formed, Caltex, came about after the 1936 discovery of oil in Saudi Arabia by Chevron, a very successful exploration company, and the subsequent joint venture with Texaco, a huge international refiner and marketer of crude, to transport and market this crude.

http://www.fundinguniverse.com/company-histories/caltex-petroleum-corporation-history/