Condensate Con | Russell T. Rudy Energy LLC
A recent article in “Oil Voice” by Kurt Cobb, offers the possibility that the global oil glut is mostly attributable to condensate, rather than crude oil per se. Condensates are hydrocarbons that exist in the reservoir as a gas, but when they reach the lower temperatures and pressures at the surface, they condense into a liquid.
Cobb cites Texas oilman, Jeffrey Brown, who notes that when government entities, analysts, and oil companies report oil inventories, they lump crude oil and condensate together. Oil and gas operators routinely mix lease condensate with heavier crude oil for shipment to refineries. While this is nothing new, the shale revolution resulted in much larger amounts of light oil and condensate production. For a while, producers could blend this lighter oil with heavier crude and sell it via pipelines to refiners.
According to Brown’s theory, in late 2014 refiners realized that these blends did not yield the product mix that they wanted. They then sought out crude oil per se, even if it had to be imported. However, the reasoning goes, all this condensate had to go somewhere and it remains in inventories. If this is in fact true, crude production has been basically flat since 2005, in spite of trillions of dollars of investment.
With oil companies cutting back on exploration and development capital due to a perceived oversupply, we could quickly have a shortage of actual crude oil that refiners are willing to buy. If this were to happen we could see a significant price increase for crude oil much sooner than expected.
To read the article in its entirety, please go to http://www.oilvoice.com/n/The-great-condensate-con-Is-the-oil-glut-just-about-oil/c414efb2d98b.aspx .
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