LONDON: Soaring domestic output of light low-sulphur crude has paradoxically increased US refiners’ appetite for imports of medium and heavy sour crude.
Refiners are increasingly blending plentiful light sweet crude from US shale fields like North Dakota’s Bakken and Texas’ Eagle Ford with much heavier and cheaper imported oil to cut crude acquisition costs while maximizing the desired output slate of valuable products.
The result is that rising domestic oil output is changing not only how much the US imports from abroad but also the type of oil it buys and the source countries.
According to the Energy Information Administration (EIA), the statistical arm of the US Department of Energy, crude imports fell almost 12 percent between 2005 and 2011, from 3.696 billion barrels to 3.261 billion.
Ethanol blending has cut total demand for petroleum-derived gasoline sharply since 2005. But imports have fallen faster than refineries’ total crude consumption, which dropped by just 150 million barrels or 2.7 percent between 2005 and 2011. In effect, the rise in domestic crude output has backed out an equivalent amount of formerly imported oil.
However, not all imports have been affected equally.
The most obvious impact has been to lower imports of the sort of light sweet oils that compete head on with those produced in the Bakken and Eagle Ford. Imports of crude with an API gravity of between 35 and 45 degrees (which matches oil produced from the Bakken) have fallen almost 260 million barrels per year (32 percent) since 2007 (Chart 2).
The result has been a big drop in imports from African light crude producers like Nigeria (down by 30 percent or 127 million barrels between 2005 and 2011), Angola (down by 27 percent or 46 million barrels) and Algeria (25 percent or 44 million barrels).
Imports of intermediate crudes, with an API between 25 and 35 degrees, have also shrunk by 278 million barrels per year (19 percent).
But less well-known is that refiners’ appetite for heavier, sourer crudes has been surging. Imports of heavy crudes, with an API of 25 degrees or less, have actually risen by 185 million barrels (14 percent) since 2007.
Refineries use complex linear programming systems to optimize their crude oil purchases based on the relative costs of different crudes and the yields of different products.
Heavy crudes (which tend to have more sulphur as well) are cheaper but harder to refine and yield more distillates and residual fuel oil unless they are intensively processed using catalytic cracking and coking units.
Light crudes (which often have less sulphur) are simpler to refine and yield more gasoline, but normally trade at a significant premium.
The aim is to buy the cheapest slate of crudes which will yield the most valuable slate of products. In order to achieve that, most refineries buy several different types of crude oil and blend them together before feeding them into the distillation units.
Refineries can be divided into three main areas: crude oil operations, where crude is unloaded from tankers and pipelines into settling tanks and mixed; production, where crude is fractionated by distillation; and product blending, where the various distillation fractions are mixed into commercially saleable products such as gasoline and diesel.
Each type of crude is initially unloaded into a separate set of storage tanks and left there to settle out the brine.
The various crudes are then transferred by pipeline and blended in charging tanks from which they are fed into the initial atmospheric distillation unit.
Crudes are mixed in the charging tanks to optimize the overall acquisition cost, as well as the refinery’s own operating configuration, and the current demand for various different end products.
The massive coking refineries along the US Gulf Coast are among the most advanced (“complex“) in the world, equipped to handle some of the most challenging crudes and maximize the output of valuable gasoline and middle distillates like diesel, while minimizing or eliminating the production of poor quality residual fuel oil which has to be sold at a discount.
Gulf refiners have had to cope with several simultaneous changes in both the crude and product markets.
On the product side, the traditional preference for maximizing gasoline output has been replaced by a need to maximize diesel. As a result, refineries’ demand for heavier, diesel-rich crudes has been increasing, replacing some of the demand for lighter, gasoline-laden oils.
Product specifications have also been tightened, with a big reduction in the amount of sulphur permitted in finished diesel for road and maritime use. Refineries must either buy lower-sulphur crudes or install expensive hydrotreating units to remove it from the crude and product streams.
Unlike their counterparts on the East Coast and Europe, Gulf refineries have invested heavily in new units to strip out unwanted sulphur and break up the larger molecules in medium and heavy crudes into lighter saleable molecules suitable for gasoline and diesel blending, which has given them a significant cost advantage.
But the sudden upsurge in light low sulphur crudes from Bakken and Eagle Ford has upset the system in a number of ways.
By providing a low-cost source of low sulphur crude it has thrown a lifeline to the smaller, older East Coast refineries.
However, it has also changed the economics of the more complex refineries along the Gulf Coast. It allows Gulf refiners to import an increasing volume of heavy crude to maximize their diesel output and make full use of their superior processing economics, while cutting it with light sweet Bakken and Eagle Ford oil to maintain an overall balance in the refining process.
Rather than just backing out imported light sweet oil barrel for barrel, production from Bakken, Eagle Ford and other shale plays is altering the entire crude slate US refineries seek to buy internationally, increasing their appetite for heavy crudes to blend with it to maintain diesel output and make best use of their investment in expensive upgrading equipment.
— John Kemp is a Reuters market
analyst. The views expressed are his own.
US refiners hunting for heavy sour crude
US refiners hunting for heavy sour crude
Arab food and beverage sector draws $22bn in foreign investment over 2 decades: Dhaman
JEDDAH: Foreign investors committed about $22 billion to the Arab region’s food and beverage sector over the past two decades, backing 516 projects that generated roughly 93,000 jobs, according to a new sectoral report.
In its third food and beverage industry study for 2025, the Arab Investment and Export Credit Guarantee Corp., known as Dhaman, said the bulk of investment flowed to a handful of markets. Egypt, Saudi Arabia, the UAE, Morocco and Qatar attracted 421 projects — about 82 percent of the total — with capital expenditure exceeding $17 billion, or nearly four-fifths of overall investment.
Projects in those five countries accounted for around 71,000 jobs, representing 76 percent of total employment created by foreign direct investment in the sector over the 2003–2024 period, the report said, according to figures carried by the Kuwait News Agency.
“The US has been the region's top food and beverage investor over the past 22 years with 74 projects or 14 projects of the total, and Capex of approximately $4 billion or 18 percent of the total, creating more than 14,000 jobs,” KUNA reported.
Investment was also concentrated among a small group of multinational players. The sector’s top 10 foreign investors accounted for roughly 15 percent of projects, 32 percent of capital expenditure and 29 percent of newly created jobs.
Swiss food group Nestlé led in project count with 14 initiatives, while Ukrainian agribusiness firm NIBULON topped capital spending and job creation, investing $2 billion and generating around 6,000 jobs.
At the inter-Arab investment level, the report noted that 12 Arab countries invested in 108 projects, accounting for about 21 percent of total FDI projects in the sector over the past 22 years. These initiatives, carried out by 65 companies, involved $6.5 billion in capital expenditure, representing 30 percent of total FDI, and generated nearly 28,000 jobs.
The UAE led inter-Arab investments, accounting for 45 percent of total projects and 58 percent of total capital expenditure, the report added, according to KUNA.
The report also noted that the UAE, Saudi Arabia, Egypt, and Qatar topped the Arab ranking as the most attractive countries for investment in the sector in 2024, followed by Oman, Bahrain, Algeria, Morocco, and Kuwait.
Looking ahead, Dhaman expects consumer demand to continue rising. Food and non-alcoholic beverage sales across 16 Arab countries are projected to increase 8.6 percent to more than $430 billion by the end of 2025, equivalent to 4.2 percent of global sales, before exceeding $560 billion by 2029.
Sales are expected to remain highly concentrated geographically, with Egypt, Saudi Arabia, Algeria, the UAE and Iraq accounting for about 77 percent of the regional total. By product category, meat and poultry are forecast to lead with sales of about $106 billion, followed by cereals, pasta and baked goods at roughly $63 billion.
Average annual per capita spending on food and non-alcoholic beverages in the region is projected to rise 7.2 percent to more than $1,845 by the end of 2025, approaching the global average, and to reach about $2,255 by 2029. Household spending on these products is expected to represent 25.8 percent of total expenditure in 13 Arab countries, above the global average of 24.2 percent.
Arab external trade in food and beverages grew more than 15 percent in 2024 to $195 billion, with exports rising 18 percent to $56 billion and imports increasing 14 percent to $139 billion. Brazil was the largest foreign supplier to the region, exporting $16.5 billion worth of products, while Saudi Arabia ranked as the top Arab exporter at $6.6 billion.
