June 30, 2015 [OPIS] - The U.S. is expected to see the first condensate dedicated pipeline and storage facilities sometime next year amid growing production and strong demand, Tom Ramsey, head of North American Marketing & Midstream at Vitol Group, told OPIS on Monday.
Ramsey was speaking on the sidelines of the North American Crude Markets & Storage Summit held in Houston. The three-day conference will end on Wednesday. The conference is focused on the future of U.S. crude exports, U.S. refineries’ crude demand, storage capacities and profitability of marketing U.S. crude.
Currently, there is no pipeline dedicated to condensate shipping. Condensate shares pipeline and logistics with crude.
He said that the new condensate dedicated pipeline will make delivery from the Delaware Basin in West Texas, and it will reduce the color and quality issues arising from commingling with current crude deliveries on crude pipelines.
Also, the new pipeline system in West Texas will deliver sweet and sour crude grade as well as condensate in batches.
Vitol is one of two main term buyers of U.S. processed condensate for exports. So far, the bulk of U.S. processed condensate exports are heading to Europe due to better netbacks and margins compared with Asia.
In addition, European buyers prefer a lower API rating of closer to 50 for U.S. processed condensate, and Asian buyers had sought the same product with a higher API rating of 55 and above.
Ramsey acknowledged that U.S. processed condensate export arbitrage economics have been challenging due to the volatile Brent-WTI crude price spread. He pointed out that the WTI is significantly more volatile than Brent as WTI remains disconnected with the global market as a result of an export ban for U.S. crude.
In 2013, Vitol formed a 50:50 joint-venture partnership — SunVit — to build a new pipeline for delivering crude from the Permian Basin in West Texas to Garden City, Texas, where it will connect with Sunoco Logistics’ Permian Basin Express II as well as other Sunoco pipelines for delivery to Gulf Coast refineries.
SunVit’s primary operating assets, including an anticipated 500,000 bbl of operating storage, will be constructed adjacent to Vitol’s existing Midland crude oil terminal and will have receipt and delivery connectivity with Vitol’s tanks.
Vitol’s West Texas assets include a crude oil terminal with over 1 million barrels of storage capacity, multiple truck unloading locations and over 100 miles of pipeline. Vitol USA provides crude oil marketing services in the Permian, offshore Gulf of Mexico and all of the major shale basins in the U.S. Sunoco and Vitol will each have a 50% ownership in SunVit.
Vitol is the largest oil trading company in the world in terms of volume.
In the U.S., Vitol also owns the general partnership of BlueKnight Energy Partners. Also, it owns an oil products terminal at Port Canaveral in Florida.
