Page 11 - NorthAmOil Week 18

NorthAmOil PERFORMANCE NorthAmOil
Desperately seeking storage
NORTH AMERICA
THE North American oil industry is scrambling to find spare crude storage capacity as invento- ries continue to rise, putting downward pres- sure on prices. Given the far-reaching impact of storage capacity running out, various players in both the US and Canada are now trying to offer temporary storage solutions.
Prominent players in this push to offer stor- age include pipeline operator Enbridge, which announced that it had struck a deal with ship- pers on its Mainline system to store crude on the network from June 1.
“Given the impacts of the pandemic and the collapse in crude oil prices, demand for incre- mental crude petroleum storage throughout North America and even more urgently in West- ern Canada is high,” Enbridge said in a May 1 filing with the Canada Energy Regulator (CER).
An Enbridge spokesperson, Tracie Kenyon, told Reuters that the company was offering about 900,000 barrels of storage – equivalent to about four standard-sized tanks – for a period of eight months. It is planning to use a portion of its Line 3 pipeline in Canada that is due to be decommis- sioned and replaced next year.
Kenyon added that Enbridge was also in dis- cussions with federal and provincial Canadian governments over the possibility of providing additional storage capacity, though no further details on this have been given as yet.
“This temporary storage, along with the fur- ther maintenance optimisations to our storage tank programme, will create more than 2mn barrels of additional storage capacity for 2020,” she said.
The comments come as cuts to Canadian production have brought some relief, allowing the industry to avoid filling storage completely to date. However, as oil demand remains depressed by the coronavirus (COVID-19) pandemic and the measures countries are taking to contain it, the risk of reaching “tank tops” continues to loom and either additional storage capacity or further production cuts are urgently needed.
“As stocks continue to build as they are currently, it is inevitable that more forced pro- duction shutdowns have to occur, except if pro- ducers have another ace in the sleeve. But a deck has only four aces and we believe we’ve seen them all,” commented Rystad Energy’s head of oil markets, Bjornar Tonhaugen.
In the US, Gravity, a water and energy infra- structure company backed by affiliates of Clear- lake Capital Group, announced last week that it was offering its inventory of crude storage tanks to producers in the Permian, Haynesville and Eagle Ford shale plays.
The company said it had “ample supply”
News emerged of nine companies that had agreed to rent space
to store 23mn barrels of crude in the US Strategic Petroleum Reserve.
available for immediate delivery. Gravity’s vice-president of sales, Mike Sledge, said the company had set aside more than 1,000 tanks to address operators’ immediate storage needs in recent weeks, and was ready to dispatch more than 4,000 tanks “as quickly as needed”.
Also last week, news emerged of nine compa- nies that had agreed to rent space to store 23mn barrels of crude in the US Strategic Petroleum Reserve (SPR). This came after the US Depart- ment of Energy (DoE) said in early April that it would offer oil companies 30mn barrels of SPR capacity. However, later in the month, the department said companies were in negotiations for only 23mn barrels of space.
The companies that have agreed to rent SPR space include super-majors Chevron and Exx- onMobil, Alon USA, Atlantic Trading, Energy Transfer, Equinor Marketing & Trading (US), Mercuria Energy America, MVP Holdings and Vitol.
US President Donald Trump had initially ordered Secretary of Energy Dan Brouillette to fill the reserve, which has about 77mn barrels of free capacity. However, the initial plan appears to be hitting roadblocks.
Private companies’ manoeuvres to make tem- porary storage capacity available will offer some breathing space, however, as the industry tries to navigate the challenges that COVID-19 has created.™
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