Who Will Buy Sable’s Oil if California Keeps Closing Refineries? | OilPrice.com
Natalia Katona
Natalia Katona is a freelance commodity analyst, based in the United Arab Emirates.
Trending Discussions
Premium Content
By Natalia Katona – Nov 11, 2026, 7:00 PM CST
- Trump’s intervention breathed new life into offshore California crude production, but Sable’s cash crunch and Democrats’ midterm gains could jeopardize that revival
- California’s refining sector has shrunk to 11 sites with 1.34 million b/d of capacity, narrowing outlets for local crude even as foreign suppliers accounted for 61% of refinery feedstock in 2025.
- Amid Sable Offshore’s liquidity woes, the project might be forced to export its crude while California relies increasingly on imported refined products.
Situated off California’s Santa Barbara coast, the Santa Ynez project operated by Sable Offshore has become a litmus test of President Trump’s determination to revive oil production in a state pursuing a future beyond it. After a decade of shutdowns, its return depended on the Trump administration’s intervention in a prolonged regulatory battle.
Originally developed by ExxonMobil, the Santa Ynez complex comprises the Hondo, Harmony and Heritage platforms and their associated onshore infrastructure. Its troubles began in May 2015, when Plains All American’s Line 901 pipeline ruptured due to external corrosion near Refugio State Beach, spilling almost 3,000 barrels of crude. The failure cut off the project’s route to local refineries and broader market, forcing production to stop. ExxonMobil eventually sold the assets to Sable in 2024 for a total consideration of $643 million.
Restarting the production proved difficult. Pipeline safety requirements, permitting disputes and court orders kept the development from returning to normal operations. Those obstacles unfolded against Democrat-led California’s broader push to reduce its dependence on fossil fuels: in 2021, Governor Gavin Newsom asked state regulators to analyze how to phase out oil extraction by 2045. Sable announced in May 2025 that it had restarted production from Harmony, a claim California officials disputed, saying the activity was well testing. The offshore platforms sit in federal waters, beyond the state’s direct reach, but the oil initially went into storage while its onshore pipeline route, which California regulated at the time, remained blocked.
The Trump administration then helped reopen that route in two steps. In December 2025, the federal Pipeline and Hazardous Materials Safety Administration (PHMSA) reclassified the onshore pipelines as interstate infrastructure at Sable’s request, asserting federal oversight, and approved their restart plan on Dec. 22. After the conflict between the US and Iran started in late February 2026, just as the ensuing energy crisis hit the markets, Energy Secretary Chris Wright invoked the Defense Production Act to direct the restoration of operations on March 13, citing supply risks and military dependence on foreign oil. Sable resumed pipeline shipments the following day. However, California’s Democratic administration challenged both interventions, turning the project’s revival into a continuing fight over federal and state authority.
ADVERTISEMENT
Democratic control of the House and Senate, won in the early November midterms, will not automatically reverse those decisions. The new Congress takes office in January, while Trump retains executive authority and the ability to veto legislation. But congressional committees can investigate the administration’s intervention, demand records and use spending negotiations to seek restrictions. Members of California’s congressional delegation have already started: in May they wrote to Sable’s CEO asking the company to preserve records and promising continued oversight in the next Congress. For Sable, the likely exposure is greater scrutiny and less scope for additional legislative support, rather than an immediate congressional shutdown. Courts remain the more direct threat to the legal foundations of its pipeline operations. Sable CEO Jim Flores said on the company’s earnings call that the rulings it has won, including one upholding PHMSA’s jurisdiction over the pipeline, are on appeal at the Ninth Circuit.
That uncertainty matters because the commercial margin for disruption is already narrow. Sable’s shares fell by more than half on November 9, touching a record low of 76 cents at one point, after it disclosed the consequences of its sole customer Chevron stopping purchases of crude in early October due to refinery maintenance and storage-tank upgrades, and warned of substantial doubt about its ability to continue as a going concern. Chevron had been the project’s only outlet, and apparently an interruption at one customer was enough to turn a production recovery into a liquidity crisis.
Management says the position has since improved. On its earnings call, Sable said all four major Los Angeles-area refineries were taking its crude after agreements with three additional buyers, among them Marathon and PBF Energy. Those relationships, however, began with starter volumes. The company was pursuing a bulk sale of up to 1.3 million barrels to finance its Q4 spending budget of $165 million to $175 million (including debt payments), with a $100 million unsecured loan basket and, if needed, a private placement of shares as fallbacks. It ended September with $38 million in cash. And while additional customers reduce concentration risk, they do not immediately repair the cash shortfall left by October’s interruption.
Crude quality adds another constraint. Santa Ynez produces heavy, sulfur-rich oil (around 15-20°API and 4-5% sulfur content), and management ackno
Source: oilprice.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.
