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1. Short 🧵
One factor to watch is US Crude oil export growth
US refineries have shown US shale absorption has reached saturation levels. The same will happen outside US. Refineries can only handle a maximum volume before capacity restraints.
One factor to watch is US Crude oil export growth
US refineries have shown US shale absorption has reached saturation levels. The same will happen outside US. Refineries can only handle a maximum volume before capacity restraints.
2. The capacity restriction is caused by the lightness (high API ) of shale. Shale contains much higher levels of Light ends than does an Arab light, urals and also a far lower amount of residue.
3. The throughput of a crude distillation column is not determined by the volume of crude coming in but rather by the maximum amount of products it can produce. Each product draw point has a maximum amount that can be produced.
4. Design of a distillation column would be significantly different if you wanted to run 200kbpd of shale oil or 200kbpd of Svedrup. Why? Because the product slate is different.
You could never run 200kbpd of shale in a column designed for 200kbpd of Svedrup and vice versa
You could never run 200kbpd of shale in a column designed for 200kbpd of Svedrup and vice versa
5. What would happen if you tried to run Shale in a a svedrup designed distillation column?
Shale would easily fill the upper light end section of the column to its maximum. That would equal what svedrup could do.
Shale would easily fill the upper light end section of the column to its maximum. That would equal what svedrup could do.
6. The problem is in the bottom sections of the column. Shale has less gasoil/residue etc. so it would not supply the same amount of heavier products as Svedrup. The bottom part of the column would be underutilized. This means less crude throughput overall.
7. trying to increase shale oil throughput to fill the gasoil and residue quantities would also cause excess light ends at the top of the column
Excess light ends means higher pressure creating problems for the temperature profile along the column.
Excess light ends means higher pressure creating problems for the temperature profile along the column.
8. this would result in the cut points of the products being affected and off-specifcation being produced.
With a higher proportion of light ends than residue as well meaning problems controlling temperature in the column as well.
With a higher proportion of light ends than residue as well meaning problems controlling temperature in the column as well.
9. Most refineries in the world have not been designed to run a full shale diet. They are designed to run a heavier crude oil. Maybe not as heavy as svedrup but definitely heavier than shale. Shale can be blended with other crudes to produce the optimum crude for a refinery.
10. But as soon as the % of shale increases past the optimum level, then the refinery throughput is reduced.
We have seen this already happen in the US where API crude input levels have stabilized (even fallen) after rising as refiners ran as much cheap shale as they could.
We have seen this already happen in the US where API crude input levels have stabilized (even fallen) after rising as refiners ran as much cheap shale as they could.
11. It is why the US has to export so much shale oil because their refineries just cannot process it. This will eventually happen outside the US as well. Especially as light sweet production increases more than medium/heavy production.
Therefore, US export growth will flatten
Therefore, US export growth will flatten
12. This will restrict US growth far more eventually than anything else. It will limit to a maximum what US shale can produce because the system will not be able to process it.
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