Opponents’ Major Road Block: Energy Security

–          NRDC’s Anthony Swift obfuscates and twists the facts on Venezuelan imports

–          The facts:

  • CITGO only refined 23 percent of the Venezuelan crude imported in July – that means other companies refined the other 77 percent of Venezuelan crude imported
  • If Venezuelan crude is primarily consumed by non-CITGO refineries, there is every reason to believe that a large amount of Venezuelan crude will be swapped out for Canadian crude
  • As IHS CERA put it, Gulf Coast refineries have a “a strong appetite for heavy crude – requiring 2.4 million barrels per day (mbd) in 2012”

From the looks of it, Keystone XL opponents have really run into a road block: Two months ago, IHS CERA released a report finding that if Keystone XL isn’t built, Gulf Coast refineries will still refine heavy crude – they will just get it from Venezuela instead of Canada.  Not only that but, as, the report states, Venezuela will be “the number one beneficiary of a negative decision” on Keystone XL.  That’s a pretty devastating projection for those determined to stop Keystone XL.

Since the report came out there has been radio silence on the issue from Keystone XL opponents – until last week.  NRDC’s Anthony Swift published a blog post – which, as usual, is full of the same tired and thoroughly debunked claims that we’ve addressed here, here, here, here, here  – but it also appears to be the first time opponents have touched on the fact that a “no” on Keystone XL is a clear win for Venezuela.

Of course, Swift, not having a good answer for advocating for more imports from Venezuela, obfuscates and twists the facts.  Let’s have a look:

Anthony Swift: “Proponents of Keystone XL are now arguing that tar sands from Keystone XL would simply replace heavy crudes from Venezuela, which are almost as carbon intensive as tar sands […] Diminishing volumes of Venezuela crude being imported in the Gulf is primarily process by refineries owned by the Venezuela state owned oil company Citgo. Needless to say, Venezuela is unlikely to displace its own crude from its refineries if Keystone XL is approved.”

FACT:  According to the Energy Information Administration’s (EIA) most recent data (July 2013), CITGO only refined 23 percent of the Venezuelan crude imported in July.  That means other companies refined the other 77 percent of Venezuelan crude imported.  So to say, as Swift does, that “Diminishing volumes of Venezuela crude being imported in the Gulf is primarily process by refineries owned by the Venezuela state owned oil company Citgo” is simply wrong.

And that matters.  Because if Venezuelan crude is primarily consumed by non-CITGO refineries, there is every reason to believe that a large amount of Venezuelan crude will be swapped out for Canadian crude.

Moreover, how likely is it that CITGO won’t change the crude they process?  Consider this: currently according to the same EIA data, only 60% of the crude that CITGO’s Gulf Coast refiners processed is from Venezuela – the other 40% came primarily from Columbia, Mexico and Gabon.  And CITGO’s refinery in Illinois refined zero Venezuelan crude – despite being configured to do so!

Anthony Swift: “While many refineries on the Gulf Coast are able to process heavy crudes, without Keystone XL they have turned to lighter, less carbon-intensive domestic crude oils as heavy crude imports from Venezuela and Mexico have declined. In fact, Department of Energy (DOE) data show that refineries on Texas’s Gulf Coast are processing lighter crudes than they have been in more than a decade. And they’re busy doing it – DOE data shows Texas Gulf refineries are operating closer to their maximum capacity than they have in years.” 

FACT:  Yes Venezuelan and Mexican imports have declined – right along with their production. And that is one of the reasons Keystone XL is so important!  What Swift doesn’t say is that Columbian imports have increased to help make up that shortfall.

And yes, on average the crude being processed on the Texas coast is getting lighter.  But that is not necessarily because heavy oil refiners (those with special equipment called ‘cokers’) are not refining as much heavy crude.  Rather it is likely because the lightweight crudes that were being imported and refined (at refineries without cokers) are now increasingly being replaced with even lighter crudes from Texas’ up-and-coming Eagle Ford field.  The result is that, on average, crudes are lighter.

At the end of the day, Gulf Coast refineries have, as IHS CERA put it, “a strong appetite for heavy crude – requiring 2.4 million barrels per day (mbd) in 2012.”  As IHS CERA continues,

Its refineries are generally configured to optimally process this type of crude given the large scale of the coking capacity already in place. Therefore, with or without oil sands supply to the Gulf Coast, refiners there will continue to process heavy crude oils. (The USGC is the center of gravity for US refining with about half of the nation’s total refining capacity).

Today, the majority of heavy supply on the USGC comes from Venezuela (0.8 mbd), followed by Mexico (0.7 mbd); the rest is from smaller suppliers including Colombia and Brazil. If Gulf refiners cannot access Canadian heavy oil, the most likely alternative is Venezuelan supply, which is projected to grow based on ongoing investments (including the Orinoco). Although Mexico has historically been a large supplier of heavy oil, its production has been dropping steadily (declining production has reduced exports; compared with seven years ago, heavy oil shipments to the United States have been cut in half). Therefore, the decision on Keystone XL may ultimately boil down to a determination of oil market share between Canada and Venezuela. Venezuelan heavy oil—and Venezuela—will be the number one beneficiary of a negative decision on Keystone. The GHG emissions from Venezuelan supply are in the same GHG intensity range as oil sands.

Winners and Losers

It’s not just IHS CERA that understands who the true winners or losers would be from increased North American oil sands development.  As the New York Times reported last week, American families have not been subjected to the usual oil shocks that would be expected from the unrest this summer in countries like Egypt, Syria and Libya. Why?  Because of the boom in North American energy production – and much of that boom can be attributed to Canadian oil sands.  As the article states, “Canadian oil production is also rising fast because of the development of western oil sands, and experts say an increase in production of 200,000 barrels a year can be expected over the next decade…”  The article goes on to explain:

Such price stability will bring with it winners and losers. Several producing countries like Venezuela, Nigeria and Saudi Arabia, which depend heavily on oil earnings to finance their governments and social programs, may be in for a shock. That could strengthen the position of the United States and even China

So with increased North American oil production, which Keystone XL will undoubtedly aid, counties like Venezuela, Nigeria and Saudi Arabia “may be in for a shock” while the United States will come out ahead.  But if we don’t approve Keystone XL, Venezuela will be the “number on beneficiary.”  The choice in terms of our national interest couldn’t be clearer.

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