A new calculation on the value of all those projects to debottleneck oil at CushingBy John Kingston | February 20, 2013
About a year ago, at the Platts North American Crude Oil Marketing Conference, University of Houston professor Dr. Craig Pirrong made an eye-opening observation. His math went sort of like this: take the narrowing of the Brent-WTI spread along the curve out to the latter part of this decade; count the number of barrels in the projects that were planned at that time to get oil away from the Cushing bottleneck (at that time just the Seaway reversal and the Keystone XL full line); assume a transportation cost; and you could figure out what the value was per day of the infrastructure that was being planned. At that point, it was a whopping $10 million per day. I’ve noted Pirrong’s calculations in several presentations since that time, because his point was that the profits the market was signaling about the value of the planned infrastructure investment were way too big to be ignored. Given that, the bottleneck was sure to ease. I used it again Monday at the Platts London Oil Forum, and somebody in the room informed Dr. Pirrong. He in turn has blogged about his calculations, and made new ones. I always figured with all the additional projects added since Dr. Pirrong made his speech at the Platts conference that the $10 million number would have been reduced. But according to Craig’s “Streetwise Professor” blog, it hasn’t gone down; it’s gone up. So before you click this link and see what the number is up to, take a guess regarding how high it might be, and see how far off you are. (One final note: Dr. Pirrong isn’t on this year’s agenda, but the Platts 2013 Crude Oil Marketing Conference is coming up next week in Houston. You can find registration information here.)
© 2013 Platts, The McGraw-Hill Companies Inc. All rights reserved. To subscribe or visit go to: http://www.platts.com |