The diverse nature or oil that has emerged from the U.S. shale boom has led to an unforeseen problems for midstream providers and ultimately, downstream buyers. The quality, consistency, and purity of U.S. shale oil spans the spectrum from super light and very sweet to that which is much heavier and rife with sulfur and other impurities.
No crude oil comes out of the ground without impurities, but some are more impure than others. But pipelines, tanks, and export terminals don’t discriminate. All are welcome as the midstream industry does its best to segregate types for transport and sale.
But those efforts are seemingly causing problems as ”chemicals for cleaning tanks or stabilizing material can leach into the supply” according to a Bloomberg News report. Additionally, when smaller carriers move crude cargo to supertankers in the Gulf, contamination from chemical handling could be fouling the hold.
Regardless of “how” shale oil is being “infected”, it is clear that it is happening. Two separate shipments (one in January and one in March (2019)) of Eagle Ford crude to South Korea was rejected by two separate refiners, according to the Bloomberg report. South Korea is the top importer of U.S. supply.
It seems that “infected crude” may be more prevalent than assumed as U.S. refiners are better equipped to handle quality issues in delivered product and thus, not turning shipments away. Thus, the problem is threatening the growing U.S. export market rather than the domestic market as it is estimated that by 2020, the U.S. will be exporting more oil than every country in OPEC, with the exception of Saudi Arabia.
In the Bloomberg report, a chief strategist at industry consultant JTD Energy Services Pte Ltd, indicated that “Since the surge in U.S. tight oil formation crude output, there have been persistent quality issues, particularly in consistency.” As the U.S. is still a new player in the oil export business, it will have to learn from these early mistakes to ensure foreign buyer confidence.