Shale Crude Shale Crude Revolution Has Only Just Begun
The next shale revolution is at hand, analysts say: Shale crudes have the potential to turn the global oil markets upside-down. Already now, the advent of shales has seen US crude imports falling by 25% from their peak with US product exports turned positive in 2011 and continue to expand.
Global crude and product flows are being drastically altered as demand for imported crude in North America declines while net product exports continue rising. A new study by PIRA Energy Group, a NYC-based energy markets consulting firm, expects that this is only the beginning...
As the U.S. has already cut back sharply on light crude imports, future production growth could displace medium/heavy imported grades with US refiners accommodating through modest capital projects and operational changes (e.g., blending). Crude/condensate exports from the US, if allowed, would ease the transition for refiners and help stabilize prices.
Refinery Margins Could Profit
As a consequence, PIRA expects US refineries processing local crude or imports priced competitively with local crude to see strong margins. Utilization rates will stay high, particularly in PADDs II and III. Overall runs in the U.S. will grow, but will be capacity limited. Product export growth will slow as runs growth slows, but will ultimately increase due to lower gasoline demand due increasing vehicle efficiency and substitution of natural gas for diesel in trucking.
China: Refinery Projects in the Pipeline
As local demand grows, China will see a rapid increase of refinery capacity and runs, PIRA analysts believe. But also the Middle East, with it's transition towards a downstream oriented industry and India with several huge export oriented refinery and petrochemical project could see capacity increase.