By LYNN DOAN and ELIOT CAROOM
Companies from Noble Energy to Whiting Petroleum are ramping
up output in the Niobrara shale oil play near the Rocky
Mountains that may help save US West Coast refiners from
dwindling supplies in their own region.
The formation spread across parts of Colorado, Kansas,
Nebraska and Wyoming is estimated to hold as much as 2
billion bbl of oil, Energy Information Administration data
show. Niobraras oil and lease condensate output will
reach a record 304,434 bpd this month, the agency said.
The Rocky Mountains play may be a godsend for Western
refiners because its crude closely matches the
characteristics of oil from the regions largest
domestic supplier, Alaskas North Slope, where output
has declined every year since 2002. A slide in Alaska and
California oil production has forced West Coast refiners to
increasingly rely on foreign imports and oil shipped by rail
from other states.
Weve had a number of shipments move by rail, but
I dont think any of it has gone to the West Coast
yet, Gary Willingham, Nobles senior vice
president of US onshore, said in Denver during conference on
Bakken and Niobrara crudes. Its certainly part of
our plan to have that flexibility. We want it to go where the
demand is and where the best price is.
The posted price for oil from the Denver-Julesburg Basin,
where the Niobrara is located, rose 75 cents to $84.05/bbl on
Thursday, according to the marketing division of Plains All
American Pipeline. Meanwhile, Alaska North Slope oil rose
$1.27 to $107.46/bbl.
Match for West
Noble, the largest producer in the Niobrara, expects its
output from the basin to surpass 100,000 equivalent bpd this
year and reach 250,000 by 2018, Willingham said at Hart
Energys 2014 DUG Bakken and Niobrara conference.
Whiting has three rigs running in its Redtail prospect there
and plans to add a fourth in August.
Oil from the Niobrara matches the medium crude Alaska North
Slope so well that it may be demanded by folks on the
West Coast, said Mark Smith, vice president of
development, supply and logistics for Tesoro, the largest
refiner in the West.
Wyoming, home to the Guernsey oil-pipeline hub, issued
permits last year allowing project
s with collectively more
than 459,000 bpd of crude trans-loading capacity. It has
approved permits for two more sites this year with as much as
146,000 bpd in capacity.
Musket Corp. runs an oil-by-rail terminal in Windsor,
Colorado, that began loading unit-trains at the beginning of
this year. The White Cliffs pipeline that carries oil from
the basin to Cushing, Oklahoma, is scheduled to double
capacity to 150,000 bpd this year.
Colorado to California
California, home to two-thirds of the West Coasts refining
capacity, received 55,025
bbl of oil by rail from Colorado in December, the most ever
for that month, and took in a record 87,951 bbl from the
state in May 2013. Colorado oil production reached a record
206,000 bpd in October.
While companies including Noble and Whiting are accelerating
drilling in the Niobrara, Continental Resources decided to
allocate spending elsewhere this year, said John Kilgallon,
the companys vice president of investor relations.
There has been some success by some operators there,
but were not one of them, Kilgallon said by
telephone March 28.