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UpstreamOnline: Mars tops oil storage tanks

By Upstream staff

Crude oil storage caverns leased by the Shell-operated Mars oil field in the US Gulf of Mexico are full, forcing producers to sell production at sharply lower prices, traders and industry sources said on Tuesday.

Differentials for Mars crude have fallen by $2 per barrel in the last week to $8.50 below WTI amid heavy selling, with traders reporting parcels of distressed August Mars crude on offer due to the lack of storage space.

Crude oil storage capacity throughout the US has become difficult to find in large quantities as refiners have been storing crude oil in anticipation of higher prices in the future, Reuters reported.

Mars blend crude is delivered from offshore fields in the Gulf of Mexico to rented storage at the Louisiana Offshore Oil Port (Loop). Industry sources said Mars has about six million barrels of storage capacity at LOOP.

“The Mars cavern is pretty full. The rest of Loop still has capacity to handle incoming shipments,” said a source familiar with operations at the facility.

Mars blend production has risen since Shell restarted the Mars field in May after repairing damage to the Mars Platform caused by Hurricane Katrina.

Shell said it expects Mars to return to pre-Katrina production rates of 140,000 barrels per day of crude oil and 157 million cubic feet of gas per day by June.

“When they turned that field back on, production came back a lot stronger than they expected, and Loop doesn’t want them to use up any more space, so they have to sell,” said a Gulf Coast crude oil trader.

Shell holds a 71.5% stake in the Mars field. BP owns the remaining interest.

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