[Graeme]

US Oil Imports: Reliance On Top 5 Foreign Supplies Hits 15-Year High

U.S. dependence on imported oil has declined sharply since peaking in 2005. However, the drop has not translated into diversification of supply sources. On the contrary, America’s reliance on the top five foreign suppliers has increased significantly over the past few years, rising in 2012 to a 15-year high.

Nearly 72 percent of all the oil imported by the U.S. last year came from these countries: Canada, Saudi Arabia, Mexico, Venezuela and Iraq, the Energy Information Administration said.

That share is up from around 64 percent in 2009, when the economic recession resulted in declining U.S. crude oil demand, and the highest share since reaching almost 73 percent in 1997. During 2012, Iraq replaced Nigeria as the fifth-largest supplier of U.S. crude oil imports.

The concentration comes even as the U.S. reduced its total crude oil imports in response to higher domestic oil production thanks to the shale revolution.

ibtimes

[Tanada]

US Oil Imports: Reliance On Top 5 Foreign Supplies Hits 15-Year High

U.S. dependence on imported oil has declined sharply since peaking in 2005. However, the drop has not translated into diversification of supply sources. On the contrary, America’s reliance on the top five foreign suppliers has increased significantly over the past few years, rising in 2012 to a 15-year high.

Nearly 72 percent of all the oil imported by the U.S. last year came from these countries: Canada, Saudi Arabia, Mexico, Venezuela and Iraq, the Energy Information Administration said.

That share is up from around 64 percent in 2009, when the economic recession resulted in declining U.S. crude oil demand, and the highest share since reaching almost 73 percent in 1997. During 2012, Iraq replaced Nigeria as the fifth-largest supplier of U.S. crude oil imports.

The concentration comes even as the U.S. reduced its total crude oil imports in response to higher domestic oil production thanks to the shale revolution.

ibtimes

If Mexico keeps declining then it will fall out of the top five pretty soon. Any bets of who will be the replacement supplier?

[shortonoil]

Tanada said:

If Mexico keeps declining then it will fall out of the top five pretty soon. Any bets of who will be the replacement supplier?

WCS (Western Canadian Select) API 20, sulfur 3.5% is almost exactly the same crude as Mexican Maya , API 23, sulfur 2.5%. The Gulf coast refineries are the largest heavy crude operations in the world, 2.86 Mb/d. With Mexico declining the Canadians are biting at the bit trying to get to that market. That is why they are pulling out all the stops to get the Keystone built.

The idea that they will sell to the Chinese if we don't buy is pure showmanship. The Chinese don't have the refinery capacity to handle it, and it would take a pipeline across the Canadian Rockies to get it to British Columbia. Building such a pipeline would take the best part of a decade, and cost many $billions. Not going to happen!

If the Keystone isn't built, Venezuela will probably replace the Maya. They ship by water and the Gulf has excellent port capabilities. At $30/b for rail to the Gulf, Canada couldn't compete with the South American crudes.

[Buddy_J]

Tanada said:

If Mexico keeps declining then it will fall out of the top five pretty soon. Any bets of who will be the replacement supplier?

WCS (Western Canadian Select) API 20, sulfur 3.5% is almost exactly the same crude as Mexican Maya , API 23, sulfur 2.5%. The Gulf coast refineries are the largest heavy crude operations in the world, 2.86 Mb/d. With Mexico declining the Canadians are biting at the bit trying to get to that market. That is why they are pulling out all the stops to get the Keystone built.

It probably also doesn't hurt that they have some half a century of supply at current rates. If you are going to make an infrastructure investment, it certainly is nice to have a supply that will see you into the other half of this century.

[shortonoil]

If you are going to make an infrastructure investment, it certainly is nice to have a supply that will see you into the other half of this century.

The supply is not a restraint for bitumen, it is the availability of NG. Right now NG prices are very low from an ROR perspective. That will probably not be the case in five years. Syncrude is only feasible because the producers are paying almost nothing for their NG.

At the present their problem is market, and the Gulf is their only option. To advance their additional m/b/d expansion objectives the Keystone is absolutely essential. Transportation costs to any other destination price them out against all the other heavy crude producers, of which there are many. The problem with the Canadian tar sands is that they are in the middle of nowhere with no cheap reliable transport for the product.

Of course the ERoEI on bitumen is horrendous, and that will come to bite them on the butt in a few years as conventional crude continues to decline. And then, if they were really convinced of the long term potential of bitumen mining they could build a $30- 40 billion refinery in Alberta.

How do you spell, "when pigs can fly"?

[Buddy_J]

If you are going to make an infrastructure investment, it certainly is nice to have a supply that will see you into the other half of this century.

The supply is not a restraint for bitumen, it is the availability of NG. Right now NG prices are very low from an ROR perspective. That will probably not be the case in five years. Syncrude is only feasible because the producers are paying almost nothing for their NG.

Fortunately for Canada they have quite a bit of natural gas. Something the US has recently discovered for itself as well. I think 85 trillion cubic meters is quite a bit of gas with which to produce bitumen.

http://www.canadianenergyadvantage.com/ ... al-gas.php

The problem with the Canadian tar sands is that they are in the middle of nowhere with no cheap reliable transport for the product.

Cheap is relative, and considering the product they have, it will get done. For the same reasons the Trans Alaskan pipeline got built. When there is reason to be developed, money to be made, and the average consumer gets squeezed, the screaming is heard by the politicians and presto....things get built. Although if they had to, they could just rail it out.

Of course the ERoEI on bitumen is horrendous, and that will come to bite them on the butt in a few years as conventional crude continues to decline. And then, if they were really convinced of the long term potential of bitumen mining they could build a $30- 40 billion refinery in Alberta.

How do you spell, "when pigs can fly"?

They are already flying. Who in the world would have thought that $80 oil was enough to steam tar off of sand, but they just keep right on doing it. EROEI, as has been pointed out elsewhere, is irrelevant if there is profit to be made.

[SamInNebraska]

How do you spell, "when pigs can fly"?

They are already flying. Who in the world would have thought that $80 oil was enough to steam tar off of sand, but they just keep right on doing it. EROEI, as has been pointed out elsewhere, is irrelevant if there is profit to be made.

Note Buddy that in every conversation I have ever seen on this website, and others, related to this topic, no one ever provides a cost/supply curve. Many of these concepts could easily be validated, or debunked, by someone providing the actual cost supply curve for how/when/which resources would get developed at a given cost. Tar sands, the extra heavy of the Orinoco, the hydrates and field growth and undiscovered conventional onshore and off and the tight oils and shale oil....add those volumes up with their related costs of development and create a cost/supply curve, and then everyone can have an honest conversation over what people are willing to pay, and how much they will get for what they pay. Instead EROEI comes out, all the small discoveries are added up and people say "that is only two days supply!"" when the answer lies in just someone like Rogers or Hughes putting out a simple cost/supply curve to show their interpretation of what a given amount of supply will cost in the future (and their view on where that supply comes from).

For example, that curve from someone would show what they consider the amount of resource available in hydrates. or shale oil. or tar sands. And how much it would cost to deliver it to the consumer. Now THAT is something all of us interested in this topic could dig our teeth into.

[shortonoil]

SamInNebraska said:

For example, that curve from someone would show what they consider the amount of resource available in hydrates. or shale oil. or tar sands. And how much it would cost to deliver it to the consumer. Now THAT is something all of us interested in this topic could dig our teeth into.

Such a curve would be nice, but there is probably no means available to construct one. One reason would be the synergistic effects from the cost of crude. That is, as an example; how much would the cost of producing a unit of bitumen increase with an incremental increase in the cost of producing a unit of conventional crude. There is definitely a relationship there, but putting it into a verifiable mathematical form is probably not possible. The number of unknown variables becomes unwieldy.

Here at The Hill's Group we are using Exergy analysis to define the state of the world's conventional crude reserves. Developing Exergy analysis was the first objective of modern thermodynamics, and was originally used to design more efficient steam engines. It's an old (150 years) an mature engineering discipline.

Once the state of conventional crude (from a thermodynamic perspective) is defined it can be used as a benchmark. That benchmark is known in thermodynamics as the "dead state". It represents the point where no additional work can be extracted from the energy of the system in question. Once identified we can look at other energy sources (that we have relevant information about) and compare them. Bitumen is an example; it is a thermodynamic dead end. Its present production is only possible because of a substantial injection of energy from almost free NG. It seems doubtful that that situation will continue for very long, and bitumen production will end before conventional crude production comes to its conclusion.

Yes a cost/supply curve would be a powerful tool for planning purposes, but I doubt we will see one in the near future; at least not a verifiable one!

[ROCKMAN]

First, a couple of points. “If the Keystone isn't built, Venezuela will probably replace the Maya” Canadian oil sand production has been replacing Mayan et al oil for Gulf coast refiners for years. In fact the amount has increased 160,000 bbls/day in just the last 18 months thanks to some relief at the Cushing bottleneck with new p/l’s to the Gulf Coast. In fact, the expansion of the lines will increase that amount to 600,000 to 800,000 bbls/day in just a couple of more years.

Except for those few miles crossing the US/Canadian border the rest of expansion of Keystone that will deliver oil from the US/Canadian border to Cushing and Missouri terminals has never stopped. Whether the US govt ever approves the crossing permit or not all that oil sand production will end up shipped through the US. It might be a bit more expense to get it across that short border segment by truck and rail but it’s been happening all this time anyway. Just a reminder: even without the border crossing section of Keystone Canada exported more oil into the US in 2012 than ever before.

As far as Venezuela heavy crude goes China cut a trade deal with Hugo some years ago by building refineries in China specifically designed to process the Vz oil and several specialty built tankers to haul it there. It was an escalating contract which I think is up to about 300,000 to 450,000 bbls/day by now. As far as the Chinese getting the Canadian production they own to China it’s legal from them to tranship it to Texas and load it onto tankers heading to China. All they need do is get a fed permit. They’re already doing it on a very minor scale. But they don’t even need to physically move the oil to China to benefit. They can go to a US refiner that has a contract, say 300,000 bbls per day, to buy the oil they process best from, let’s say the Saudi oil fields. The Chinese offer to swap 300,000 bbls per day of their Canadian oil which can be more cheaply shipped to that Gulf Coast refinery via the pipeline system. The GC refiner jumps at the deal because he just saved, let’s say, $1 per bbl in transport cost by not paying to ship 300,000 bbls per day half way around the world from the KSA. Likewise the Chinese would save, let’s say, $1 per bbl shipping it from a GC port to China and instead taking the shorter route from the KSA to China. A buck a bbl savings on $100/bbl oil may not sound like much. But the two parties save $2 per bbl X 300,000 bbls X 365 days. That’s a total saving of over $200 million per year by doing a little bit of paper work. That’s a good bit of motivation to do some horse trading. And all very legal and doesn’t require any approval of any govt.

Such paper swaps have been going on for many decades and continue today. If China never ships one bbl of Canadian oil to their homeland they can still greatly benefit from such acquisitions. Which IMHO is exactly why China has invested 100’s of $billions in acquiring foreign oil reserves in the ground. At a time when the US govt hasn’t bought one bbl of foreign oil reserves in the ground. US based oil companies have…not the US govt.

As far as cost/supply curves go just MHO: “And how much it would cost to deliver it to the consumer.” To be delivered by whom? I can show you two companies producing oil from the same reservoir in the same field in Texas where Company A is spending 3X as much to produce that oil as Company B. I can also show you Company C that spent $30/bbl to develop their Eagle Ford Shale oil and Company D that spent $65/bbl to develop their EFS oil in the lease adjacent to Company C. And all the companies are selling their oil for the same price.

So what’s the cost/supply curve for EFS oil on average? I guess if you had all the cost factors of every company producing EFS oil one could do a weighted average. I have no idea how one could go about collecting that data. I may drill 10 EFS wells and produce 3000 bopd from them and must report that to the Texas Rail Road Commission. But I’m not required to tell anyone how much I spent to drill those wells nor what I spend to produce them. But what about the typical cost to drill such a well? I’ve seen to companies drill and frac wells identically and it costs one 30% more to do so then the other did. Nor am I required to tell anyone how much I spent drilling the two dry holes I had while trying to develop those leases I drilled the 10 successful wells on. Nor do I have to tell anyone about the $2 million in leases I dropped without drilling thanks to the results of those two dry holes. Last year I dropped $1.2 million of offshore leases without drilling them after the new seismic said I shouldn't poke a hole out there. Not a penny off that cost can be worked into my offshore cost/supply curve because no one knows about it.

I know it tempting/frustrating to try to make predictions when generalizations are all you have to work with. Company A may say they are spending $X per bbl to produce their EFS oil. I’ve been in the oil patch for almost 4 decades and I don’t know how to interpret/use that number. Is that just for the successful wells? Does it include the cost of dry holes or are they just using the cost of the wells that worked? Does it include the tens of $millions spent on leases (which is a growing issue the SEC currently has with some of the pubcos and their press releases)? Does it include the overhead of their staff? Is it a company that had investors pay for a portion of the company’s drilling costs (a common trade in the oil patch called a “carried interest”)? So the cost to the company was $30/bbl but to the investors that paid 75% of the capex to drill the well the cost was $55/bbl?

Many statements the oil patch put out appear to be simple and clear. In reality often they are not even to folks like me who understand exactly how the game is played. But I do know the questions to ask to get to the truth. Unfortunately in my experience most companies refuse to answer those questions.

[shortonoil]

“We cannot process 2-4 million b/d,” he continued, referencing Canadian production.

RigZone

Like I mentioned above the Chinese do not have the capacity to process another 1 mb/d of Canadian WCS, and there is very little likely hood that that they would want to. This is for two reasons:

1) The Chinese economy is slowing down very rapidly; their demand for heavy crude is going to fall. Building an enormously expense refinery to process more it just isn't going to be in the cards.

2) WCS is what refiners call a "dump bell" crude. It has more heavy and lighter fractions than middle fractions. That is because it is bitumen and diluent (dilbit). The Chinese are moving away from gasoline and toward diesel. The fractions needed to make diesel are mostly in the middle. Dilbit is not particularly suited for the production of diesel.

Like I said before, if the Keystone is not approved (and Obama has a political cat by the tail) the replacement oil for the decline of Maya would most likely come from Venezuela. Without the pipeline the extra 1 mb/d production from Alberta can not be cost effectively developed; the logistics of the situation becomes untenable for the tar sands.

Time will tell?

[ROCKMAN]

Apparently the Chinese have a different view of their future in oil refining. From: http://www.usnews.com/opinion/blogs/on- ... ill-the-us

“China…is investing more than $40 billion building refineries at home and in Egypt, Nigeria, and Saudi Arabia. With the Saudis, China's deal…is the largest expansion by any oil company in the world. Chinese petroleum company Sinopec's deal earlier this year with Saudi oil giant Aramco will allow a major oil refinery to become operational in the Red Sea port of Yanbu by 2014.

The Yanbu project is an $8.5 billion joint venture. It is expected to process 400,000 barrels of heavy crude oil per day. Sinopec will own 38%. By all accounts China's investment in oil infrastructure and refining capacity, at home and abroad, supports a long-term strategy of developing world-class refining facilities in partnership with OPEC suppliers. Such relationships mean economic leverage that could soon make China OPEC's premiere purchaser and subordinate U.S. relations with the same countries.

Also underway is a joint project to build Egypt's largest refinery ever. In its agreement with Nigeria, China is investing $23 billion to build three refineries (combined 750,000 barrels per day of refining capacity) and a fuel storage complex. In recent years China has also expressed an interest in exploring for oil in southern Venezuela and granted a $20 billion loan to Venezuela to secure oil supplies there too. China is planning for a future they see at least 50 to 100 years or more from now.

And “Brazil seeks Chinese help building oil refineries” from http://www.reuters.com/article/2013/02/ ... CE20130228

Brazil's government said Thursday it is seeking Chinese help to finish work on two oil refineries, a sign of strengthening ties between the emerging powers as well as financial troubles at state-run oil giant Petrobras. Petrobras was in China negotiating a partnership with China Petroleum & Chemical Corp (Sinopec) that would allow the company to finish Diesel refineries in two northeastern states by 2018. Petrobras is under pressure to build refineries and boost its fuel output as Brazil's economy has boomed over the past decade.

And lastly “Chinese oil refiners grow steadily”. From http://english.peopledaily.com.cn/90778/8129152.html

China's oil refining industry grew steadily in 2012 as a result of rising domestic consumption. Chinese oil refiners processed 467.91 million tons of crude oil in 2012, up 3.7 percent year-on-year. Domestic demand has basically been met, with consumption of gasoline and kerosene rapidly rising.

Buoyed by the expansion of both the auto market and aviation industry, the consumption of gasoline and kerosene in 2012 rose 12.2 percent to 86.84 million tons and 14 percent to 20.95 million tons, respectively, whereas diesel consumption stayed almost flat at 169.73 million tons, the report said. Imports of refined oil dropped 16.9 percent to 7.16 million tons last year due to abundant domestic supplies, while exports shrank 3.3 percent to 12.23 million tons due to tighter controls over outbound oil products.

And from our ever watchful friends at the IEA: “China's oil refiners are expanding so fast that the International Energy Agency says they might boost exports to find new buyers. The world's second-biggest oil user will probably add more than 2.9 million barrels a day to its crude-processing capacity by 2017. The IEA says the nation may become a powerhouse in fuel exports as domestic supplies exceed demand. "China will become a big oil-product exporter around 2014 to 2015 as a result of its refining-capacity expansion." Sinopec, the country's biggest refiner, completed a catalytic-cracking unit last month with an annual capacity of 3.5 million tonnes of crude. PetroChina, the second-biggest, increased the capacity of the nation's oldest refinery 11.5 million tonnes a year. In August the company also started a six million tonne-a-year crude-distillation unit at its Daqing refinery.

As far as the expansion of the Canadian oil sands being held back by the lack of the crossing permit and having to depend on Vz crude to sub for Mayan I don’t see the problem. First, oil and refinery products are moving across the border quite nicely via the 6 existing pipelines that have been in place for decades and the ever expanding rail and truck transport. The system allowed more oil to be exported to the US than ever before in 2012. The well-advertised difficulty wasn’t getting the oil across the border but getting it to the Gulf Coast from OK. That's what my Canadian cousins were pissing and moaning about. That system from OK to the coast has already been expanded by almost 200,000 bopd with an expansion to 800,000 bopd of that tasty Canadian honey reaching those hungry Gulf Coast refiners in a couple of years. And all happening whether the border crossing permit is issued or not...as it’s happening today.

[Graeme]

Shortonoil is right. Canada should be worried.

The secret threat to Canada’s oil sands

The bottom line is that Canada and Venezuela produce the same kind of heavy crude that’s now sought by re-engineered U.S. petroleum refineries along the Gulf of Mexico. So does Mexico.

In recent years, Canada has been winning the competitive battle to feed those refineries. Alberta oil has steadily displaced Mexican and Venezuelan crude in the U.S. market.

But there is no certainty that shift will continue. Indeed, Venezuela and Mexico are showing tentative signs of getting their energy act together.


An often overlooked risk for Canada’s oil patch is the possibility that both these underperforming competitors could start ramping up production and exports again. That would exacerbate the already-significant price discount on Canadian crude in the U.S. market. It would also ratchet up pressure on Canadian producers to access alternative markets in China and India via pipelines to the West Coast.

Politics and economics have held back Venezuela and Mexico. But the landscape in both countries is shifting.

Hugo Chavez was an unexpected gift to the oil sands. Now that he’s gone, Venezuela has a much greater chance of shedding its image as an unstable and inefficient supplier of oil to the U.S.

Venezuela has proven oil reserves of 211 billion barrels, eclipsing Canada’s 175 billion barrels, according to the U.S. Energy Information Administration.

And in Mexico, newly installed President Enrique Pena Nieto is vowing to reform the country’s troubled oil industry and attract private investment, particularly to help develop deep offshore and shale reserves in the Gulf of Mexico. Mexico has nearly 11 billion barrels of proven oil reserves, but roughly twice that including potential unconventional and deepwater sources.

Mexico is unlikely to privatize Petroleos Mexicanos – the state-owned oil company known as Pemex. But Finance Minister Luis Videgaray acknowledged recently that Mexico can’t do everything itself and there might be opportunities for private investors in unconventional oil and gas projects where “Pemex clearly doesn’t have either the capital or the expertise.”


But if, and when, they do, Canada could be the biggest loser. More Venezuelan and Mexican oil coming into the U.S. would likely lead to an even larger discount on oil sands crude, which is already hampered by high extraction costs and limited pipeline capacity.

theglobeandmail