Reuters
Shale oil - from curse to cure for US E.Coast refiners?

Wednesday, April 04, 2012

NEW YORK, April 4 (Reuters) - In 1902, the S.S. Paraguay set sail from Texas carrying the first shipment of 400,000 barrels of oil from the Spindletop field to a new refinery on the Delaware River.

Oil output from U.S. shale oil plays will top 800,000 bpd by 2016, according to estimates by energy consultancy Bentek Energy, doubling over four years. While initial results from five Utica shale wells last year in Ohio disappointed some analysts this week, that is unlikely to dim enthusiasm substantially for the sector.

It's not only about quantity. So far, the major shale oil crudes are light and sweet, increasingly a poor match for geared-up Midwest and Gulf Coast refiners that have invested billions of dollars to run cheaper, heavy grades -- but a godsend for the simpler plants on the East Coast.

Despite less-than-stellar initial results, Bentek executive Jim Simpson points out that the Utica formation is only 200 miles (320 km) west of the East Coast refineries.

"Can the refineries be saved or is there too much of a disconnect?" said Simpson, who added that Utica crude with its 35 degree API -- a measure of density -- was a good match for East Coast appetites.
"It depends if the Utica comes online fast enough. It might make sense to spend the money on the refineries if you knew you had secure supply of crude at a WTI price," Simpson said.

"It depends if the Utica comes online fast enough. It might make sense to spend the money on the refineries if you knew you had secure supply of crude at a WTI price," Simpson said.

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