Revised Segregation 20 spec at LOOP to include Midland, Bakken crudes: In the LOOP

The Louisiana Offshore Oil Port is marketing a revised specification for oil stored in one of its eight underground caverns that will allow US light sweet crudes Midland Sweet and Bakken to be delivered alongside Eagle Ford and several West African grades, market sources said.

The revised specification is for the cavern blend Segregation 20, which currently allows for deliveries of maximum 46.5 API Eagle Ford Crude, and the Nigerian grades Bonny Light (34.4 API, 0.20%S), Forcados (30.3 API, 0.18%) and Qua Iboe (36.3 API, 0.12%). The caverns altogether hold about 60 million barrels roughly split evenly between the caverns, or about 7.5 million b/cavern.

That cavern is likely underutilized. LOOP has received just 2.4 million barrels of Qua Iboe by water in the past two years and no imports of Forcados or Bonny Light, according to Platts Analytics and US Customs data. ExxonMobil imported all of those barrels in three cargoes delivered in February and March 2016, and January 2017. It is also possible that crude was not delivered into the cavern, but rather a leased tank.

Sources said the new spec could go into effect in October.

LOOP did not immediately respond to a request for comment.

A new blend incorporating more US grades likely would lead to increased imports into LOOP and give greater flexibility to shippers and regional refiners that collectively have more than 2.5 million b/d of refining capacity. LOOP customers have tended to focus on waterborne imports of heavy and medium sour crudes.

Domestic oil production has boomed in recent years. The US Energy Information Administration last week projected September oil production of 2.6 million b/d in the Permian Basin, 1.4 million b/d for Eagle Ford, and 1.05 million b/d for Bakken. That production has largely pushed out imports of competing light sweet grades from West Africa.

Midland Sweet is another name for West Texas Intermediate or Permian crude, but which arrives at the US Gulf Coast having bypassed Cushing, Oklahoma. More than two dozen assays dating to 1994 show WTI has averaged 40.4 API, but in recent years it has skewed toward 41-42 API. Bakken is typically 42.3 API and 0.12% sulfur.

Eagle Ford is known for having a lot of variance in the gravity of the oil coming out of the South Texas shale play. Crude assays available to Platts show an API range of 40.1-63.8 and sulfur of 0%-0.242%. Generally, Eagle Ford oil is considered crude when less than 50 API and condensate at or above that level. Among Eagle Ford crude assays, the average API is 46.1.

LOOP currently stipulates Segregation 20-deliverable Eagle Ford must adhere to the following specifications: maximum API of 46.5; maximum sulfur of 0.33%; total acid number max 0.20 mg KOH/g; metals of max 7 ppm; max 20 ppm mercaptans; C2-C5 max 8% by volume; and heavy ends not to exceed 7% by weight.

If not sent by water, those crudes could reach LOOP via Shell's Zydeco pipeline (formerly known as Ho-Ho) or Energy Transfer Partners' forthcoming Bayou Bridge pipeline. The 480,000 b/d line connects Nederland, Texas, with Lake Charles, Louisiana, but is being extended to reach the Louisiana oil hub of St. James.

LOOP is no stranger to managing a blend of crudes. For more than two years, LOOP has dedicated one cavern to LOOP Sour, comprised of US Gulf of Mexico grades Mars and Poseidon, and a blend of Middle East crudes called Segregation 17, comprised of Arab Medium, Basrah Light and Kuwait Export Crude.

The 'In the LOOP' Americas crude oil wrap runs each Monday in Crude Oil Marketwire, North American Crude and Products Scan and on the Platts Global Alert. You can read the FAQ: USGC LOOP Sour crude here and find the full special report LOOP Sour Crude: A benchmark for the future here.