November 15, 2023 [Reuters]- U.S. oil pipeline and export terminal operators are stepping up quality checks after finding an out-of-specification cargo that raised worries of excess metals contaminating Texas shale oil, operators and sources said.
WTI Midland, the crude from the top U.S. shale field which joined the Dated Brent index in June, increasingly is flowing to European refiners. Concerns that contaminated oil could damage refining units and the oil’s reputation spurred more routine testing, people familiar with the matter said.
Oil index publisher S&P Global Platts added WTI Midland to the Dated Brent Index and set a quality standard for the crude. Its testing has found only one out-of-specification cargo among this year’s 54 trades, a spokesperson said.
WTI Midland crude flows to Europe have set the price of widely used Dated Brent on more than half the trading days since May, according to price reporting agency Argus, putting more of the U.S. crude in the hands of European refiners.
But high levels of iron and vanadium metal in oils blended into WTI Midland can damage European refineries, which typically have less complex processing units and are unable to filter the metals.
U.S. pipeline companies and crude marketers often mix more expensive WTI Midland with cheaper varieties such as West Texas Sour, Domestic Sweet or Eagle Ford to boost profit margins. Those cheaper grades often contain higher levels of iron, vanadium and nickel.
Oil pipeline and terminal operator Enterprise Product Partners (EPD.N) said it has developed a system to monitor its crude input to ensure the oil sold as WTI Midland meets specifications that mirror Platts.
“Every WTI cargo we’ve loaded has met the Platts Dated Brent specs. That is over 100 cargoes of crude,” Co-Chief Executive Officer James Teague said in October.
Energy Transfer (ET.N) earlier this year discovered an out-of-spec batch of WTI Midland, Executive Vice President Adam Arthur told an industry event in Houston in June. The company declined to comment further.
ONEOK Inc, which bought Magellan Midstream last month, is trying to ensure the WTI Midland crude it exports is separated from other pipeline streams, one of the people familiar with the matter said. ONEOK declined to comment.
Pipeline firm Enbridge (ENB.TO), which operates an oil export terminal near Corpus Christi, Texas, has stepped up quality checks, but has not identified any issues to date, the company said.
Despite the checks, “there are definitely lower quality barrels that are getting marginally blended into export WTI in Midland and elsewhere,” a third person said.
Platts requires oil provided to the Dated Brent Index be unblended crude transported from the Permian on specific pipelines and exported from one of 11 terminals. It also limits how much minerals and metals can be present.
It has not removed any export terminals from the approved list for not meeting its specification, a spokesperson said.
Other companies with approved oil export terminals, including Pin Oak, Flint Hills, Gibson Energy (GEI.TO), did not respond to requests for comment. Plains All American (PAA.O) and EPIC declined to comment.
Traces of Vanadium and iron present in WTI crude at an Enterprise’s Houston storage terminal fell in September and October from June, data posted on the company’s website showed.
It did not publish the data in July and August while it was scrutinizing and tightening quality controls, one of the people said.
“Some pipelines originating in the Permian (oilfield) are getting a reputation for having higher metals content,” said oil consultant Brett Hunter, of Energy Hunter LLC. “We expect more robust quality programs, and more frequent testing.”
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