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Report profiles U.S. fuel and petrochemical supply chain

Infrastructure is a must-have when an industry switches from import to export.

08/01/2018


Courtesy: Steve Rourke, CFE MediaAs the United States transitions from being a net petroleum importer to net exporter, a recently published report from the American Fuel & Petrochemical Manufacturers (AFPM) association etches an exceptionally detailed and well-done profile of a crucial industrial sector: fuel and petrochemical supply chains and infrastructure.

The report is of interest for several reasons. For one, oil & gas industry expansion is a major factor driving the current U.S. economy's growth, news reports indicate.

Together, growing domestic crude oil and natural gas production; expanding capacity at refining and petrochemical facilities; and higher manufacturing utilization rates all contribute to the industry's current economic impact, says the AFPM report, whose lead authors include Susan Grissom, AFPM industry analyst and Rob Benedict, AFPM director of transportation and infrastructure.

The report gives a sense of the enormous scale and scope of U.S. infrastructure that today supports pipeline, waterborne, rail, and truck transport of hydrocarbons, fuels, and petrochemicals. With growth forecast to continue, infrastructure development is a key industry concern.

  • According to the U.S. Energy Information Administration (EIA), U.S. production of crude oil in 2018 will average 10.7 million barrels per day (b/d). The previous record was set in 1970 at 9.6 million b/d. Crude oil production will increase 15% over the next 10 years.
  • Natural gas liquids (NGL), as petrochemical feedstocks, will reach 4.3 million b/d and grow 20% over the next decade.
  • The petrochemical industry is expanding existing capacity and building new plants. The AFPM report says estimates for the global petrochemical industry are at more than $800 billion within the next five years.

Infrastructure is what?

So-called midstream infrastructure includes pipelines, ports, waterways, railroads, roadways, and storage facilities. Upstream production is transported to refineries and petrochemical manufacturing facilities and then to storage terminals and retail outlets. Petrochemical products are shipped from the plants that produce them to the manufacturing plants that turn them into myriad every day consumer products.

Oil, natural gas liquids, other feedstocks, and natural gas are shipped to facilities that produce common fuel products that include gasoline, diesel, residual fuel oils, propane, lubricants, asphalt, base oils and waxes, while petrochemical products include ethylene, propylene, butadiene, benzene, toluene, and xylene.

Natural gas in refining and petrochemical processes includes raw, or wet, natural gas, i.e., methane and entrained NGLs, used in the production of NGLs. Consumer, or dry, gas, which is 95% to 98% methane after removing entrained NGLs and impurities. Besides use by consumers, the natural gas is an inexpensive energy source and a feedstock for hydrogen production.

Pipelines primer

Oil and natural gas infrastructure are dominated by use of pipelines for transportation, points out the APFM report.

Each day, 207,000 miles of crude oil, NGL and refined product pipelines move raw materials from production areas to refineries and petrochemical plants. Finished products from these plants and facilities are moved to distribution terminals serving consumer markets.

In addition, pumping stations manage pipeline flow and pressure. Interconnection stations allow for product to flow from one pipeline to another. And breakout tankage provides temporary shortage.

According to the U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA), 76,000 miles of crude oil pipelines, 69,000 miles of NGL pipelines, and 62,000 miles of refined product pipelines are in operation in the U.S. From 2010 to 2016, crude oil and NGL pipeline mileage increased by 25%. Refinery pipeline receipts have increased 30% since 2010.

Besides liquids, pipelines move wet and dry natural gas. Pipelines, according to the report, transport almost all natural gas supply. In 2016, the natural gas pipeline network included 18,000 miles of gathering pipelines at production facilities, as well as 300,000 miles of transmission pipelines that deliver gas directly to neighborhoods and consumers.

The report states pipelines are one of the safest modes of transporting petroleum liquids. They also state that investment is needed to construct new pipelines, as well as expand existing systems.

The report is available at the AFPM website.

All systems go for U.S. oil & gas industry

According to a recent article in Oilprice.com, the U.S. oil industry played a large part in America's impressive second quarter economic growth-the fastest growth since the third quarter of 2014. Real U.S. gross domestic product (GDP) rose at an annual rate of 4.1 percent, according to the estimate released by the Bureau of Economic Analysis (BEA). Nonresidential private fixed investment in mining exploration, shafts, and wells jumped to $129.4 billion this past quarter, from $109.2 billion in the first quarter of 2018. On an annual basis, the rise in investment in exploration, shafts, and well surged 97% from the second quarter of 2017. This surge was the second-highest annual gain on record, with the largest booked in 1987, according to Bloomberg calculations. (The mining-exploration subcategory includes all types of mining, but petroleum and natural gas account for 96 percent of it.)

Private investment in petroleum and natural gas jumped to $123.7 billion in the second quarter of 2018 from 103.8 billion in the first quarter, and up from the $90.5 billion investment in the second quarter of 2017, BEA figures show.

Meanwhile, U.S. oil production continues to set records, according to the Oilprice.com story. Over the past two weeks, American crude oil production hit 11 million b/d after having sustained production of 10.9 million b/d over the previous four weeks, according to U.S Energy Information Administration (EIA).

In the biggest U.S. shale regions, production is expected to jump to 7.47 million b/d in August, up by 143,000 b/d from an estimated 7.327 million b/d in July, EIA's latest Drilling Productivity Report says.



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