Ground was recently broken on the first new oil refinery in the United States since 1976. The refinery is being built near the Bakken shale formation in North Dakota, one of the centers of the recent American shale boom. Until now, most of the oil extracted in North Dakota has wound its way to Gulf coast refineries by pipeline, truck and train. But, as Reuters reports, America’s oil infrastructure is adapting to a new reality:
North Dakota produces more crude oil than any state except Texas. But because the state only has one refinery, it imports more than half of the roughly 53,000 barrels of diesel consumed each day by rigs that suck oil out of the ground, and trucks and trains that transport it….Despite producing thousands of barrels of oil each day, North Dakota relies on refineries on the U.S. Gulf Coast and elsewhere for much of its diesel….MDU and Calumet hope to be making about 8,000 barrels of diesel per day within 20 months, far less than refineries on the Gulf Coast. The smaller size of the refinery will make it easier to build, and its modular design will give the owners the option of moving it in future should market conditions change.
Two more proposed North Dakotan refineries are also heading toward construction. It’s a logical development, as transporting oil over great distances is expensive and potentially hazardous, as we saw in Arkansas recently. Refining closer to the production site helps the bottom line and should allay some environmental concerns.Projects like this can ensure the shale boom doesn’t go bust. Despite having the world’s most extensive network of pipelines, America’s shale oil is running into transportation bottlenecks. There’s also a lack of refineries capable of working with the light, sweet crude that’s being extracted from US shale—most Gulf coast refineries are geared toward the heavy, lower quality variety.This refinery and the two more on the way won’t by themselves change how we bring shale oil to market. But the MDU/Calumet project and similar refineries could make more shale oil economically viable to extract while cutting out some of the potentially hazardous cross-country transportation of crude. The US needs to continue to develop a smart, robust energy infrastructure. This seems like a step in the right direction.[Image courtesy of Shutterstock]