Crude Oil Screening - General Meeting Results of Initial Screening Process to Identify Potential HCICOs Gordon Schremp California Energy Commission February.

Crude Oil Screening - General Meeting

Results of Initial Screening Processto Identify Potential HCICOs

Gordon SchrempCalifornia Energy Commission

February 17, 2011

Overview• Objectives & Background• Marketable Crude Oil Names – Review & Update• Potential High-Carbon Intensity Crude Oils (HCICOs)

– Initial screening steps

• Preliminary results of initial screening & associated issues– Flaring– Thermally Enhanced Oil Recovery (TEOR)– Mining/upgrading

• Upgrading refers to the use of further processing of crude oil to increase API gravity• Canada and Venezuela use upgraders

• Continuing Work– Confidential industry survey – Screening of additional “MCONs of Interest”

2/17/2011 2

Objective & Background

• Apply ARB’s potential High-Carbon Intensity Crude Oil (HCICO) screening process to list of Marketable Crude Oil Names (MCONs)– Sequential procedure to assign “pass” or “fail” based on:

• Flaring intensity• Thermally enhanced oil recovery (TEOR)• Mining extraction of bitumen• Use of upgrading facilities to produce synthetic crude oils

– Identification of shortcomings– Example of a false “pass” - identification of potential HCICO from

other information sources

• For a description of information resources, process and contents of the initial MCON list see CEC 9-10-10 presentation http://www.arb.ca.gov/fuels/lcfs/lcfs_meetings/090910cec.pdf

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Marketable Crude Oil Names - Review

• Proprietary information resources used to finalize initial list– International Crude Oil Handbook (ICOM)– Journal of Commerce – Petroleum Import Exports Reporting System– Crude Information Management System from PetroTech Intel

• Two sources used to create list of MCONs– Selected all marketable crude oil names from ICOM– Included any additional crude oil names that appeared as foreign

imports in the PIERS data base

• Nearly all marketable crude oil names have been matched to primary & tertiary fields – but not the relative contributions

• Total number of MCONs – 251– 47 different countries, including the United States

2/17/2011 4

Marketable Crude Oil Names - Update

• New names from 2010 ICOM list– Pyrenees – Australia– Frade - Brazil– Tupi – Brazil– Jubilee – Ghana (new country for MCON list)

• New names that appeared for first time in California in the PIERS data set for 2010– Marlim Sul – Brazil– Ostra – Brazil

• Revised MCON list expanded to 257 names & 48 countries• All new MCONs are offshore sources

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California MCON ImportsUpdated for 2010

2/17/2011 6

Sources: CEC Analysis of PIERS Data

Between 22 & 28 additional MCONs imported from non-2006 Base Line countries

Country 2006 2007 2008 2009 2010 Country 2006 2007 2008 2009 2010Algeria 1 1 1 1 Mexico 2 1 2 1 1Angola 3 5 6 5 1 Neutral Zone* 1 1 1 2Argentina 1 1 1 3 2 Nigeria 1 2 1 1Australia 2 1 1 Norway 1 1 1Azerbaijan 1 1 Oman 1 1 1 1 1Brazil 2 3 5 5 4 Peru 1 1 1 1 1Cameroon 1 1 1 Russia 2 2Canada 1 2 4 4 3 Saudi Arabia 3 3 3 3 2Chad 1 1 1 1 Thailand 1Columbia 3 4 4 4 4 Trinidad & Tobago 1 1 1Ecuador 2 2 2 2 2 UAE - Abu Dhabi 1 1 1 1Equatorial Guinea 1 Venezuela 6 4 3 6 3Indonesia 1 1 Vietnam 1Iraq 1 1 1 1 1 Yemen 1 1Malaysia 1 Totals 36 41 41 45 34

* Kuwait Portion

Step A – Does marketable crude oil name (MCON) originate from a 2006 Base Line country?

No Yes MCON is not a potential HCICO Step B – Does MCON originate from a country that has an average flaring intensity greater than 10.0 m3/bbl for the most recent year?

No Yes MCON is a potential HCICO Step C1 – Does MCON originate from a country that has any Thermally Enhanced Oil Recovery (TEOR) operations per the most recent O&GJ annual survey?

No Yes Step C2 – Are any of the MCON source fields listed as TEOR?

No Yes MCON is a potential HCICO

Step D – Is the MCON sourced from any mining activity or output from any form of upgrading facility?

No Yes MCON is a potential HCICO MCON is not a potential HCICO

Initial Screening Steps

• 4 sequential steps

• 257 MCONs screened

• Test takes a few minutes...

• If MCON has been coded & all source fields are listed for TEOR country MCON

• Zero “unknown” results

• 1 false “pass”

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Potential HCICOs – Initial Screening Results

• 191 MCONs receive a “pass” – 32 from Base Line countries– None of the Base Line country MCONs would have received a “fail”

• 66 MCONs receive a “fail” and are potential HCICOs– 8 of 45 import MCONs during 2009– 7 of 34 import MCONs during 2010 (could be more)

• Lokele – Cameroon• Albian Heavy Synthetic - Canada• Cold Lake Blend – Canada• ESPO Blend - Russia• Vityaz Blend - Russia• Petrozuata - Venezuela• Zuata Sweet (Formerly Sincor) – Venezuela

• One false “pass”– Oman Blend has been determined to contain crude from TEOR fields

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2010 Calif. Foreign Import Sources (Jan-Nov)

2/17/2011 9

23.4%

20.8%20.2%

7.2% 7.0%6.3% 5.8%

2.6%1.5% 1.5% 1.2% 1.1%

0.5% 0.4% 0.3% 0.1% 0.1%0%

5%

10%

15%

20%

25%

Saud

i Ara

bia

Ecua

dor

Iraq

Braz

il

Cana

da

Russ

ia

Colu

mbi

a

Ango

la

Om

an

Peru

Vene

zuel

a

Arge

ntina

Nig

eria

Aust

ralia

Kuw

ait

Uni

ted

Arab

Em

irate

s

Trin

idad

& To

bago

Perc

ent o

f Tot

al F

orei

gn C

rude

Oil

Impo

rts

2006 Base Line Country

Potential HCICO

Non-HCICO

Source: CEC Analysis of EIA Company Level Import Data

CA Refinery receipts Jan-Nov 2010Crude Oil Millions Percent

Source Barrels of TotalForeign 267.8 48.2%

California 210.6 37.9%Alaska 77.3 13.9%

Flaring Screen – Initial Results & Issues

• 47 MCONs exceed the 10.0 m3 per barrel limit – “fail” using the O&GJ crude oil production data for the intensity calculation

• Two issues associated with flaring screen– Copyright infringement– Updated NOAA & EIA data

• Flaring intensity is a measure of flaring emissions by country divided by crude oil production– There are two sources of oil production

• Oil & Gas Journal (OGJ) - proprietary• Energy Information Administration (EIA) – public

• NOAA flaring estimate is public data– If O&GJ data is used, anyone can “back out” the O&GJ values– This scenario would be a copyright infringement

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Flaring Screen – Issues

• EIA data should be used to calculation flaring intensity– Will reduce the number of “fail” grades from 47 to 36

• Algerian Condensate - Algeria• Saharan Blend – Algeria• Zarzaitine - Algeria• Alba Condensate - Equatorial Guinea• Ceiba - Equatorial Guinea• New Zafiro Blend - Equatorial Guinea• CPC Blend - Kazakhstan• Karachaganak Condensate - Kazakhstan• Kashagan - Kazakhstan• Kumkol - Kazakhstan• Tengiz – Kazakhstan

– None of these MCONs were imported to California during 2010

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Flaring Screen – Issues

• NOAA flaring data from 2009 available– Use of revised 2009 NOAA data with 2009 EIA crude oil production

numbers show a decline in flaring intensity for Papua New Guinea (PNG) that drops them from 24.1 to 7.3 m3/bbl

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00.05

0.10.15

0.20.25

0.30.35

0.40.45

Esti

mat

ed G

as F

lare

d (B

CM)

PNG

Source: NOAA's National Geophysical Data Center (NGDC)

The sole PNG MCON, “Kutubu”, was not imported to California during 2010

2008 flaring intensity using EIA data was 25.7 m3/bbl

2008 flaring intensity using O&GJ data was 24.1 m3/bbl

TEOR Screen – Initial Results

• 64 MCONs originate from countries that are listed in the Oil & Gas Enhanced Oil Recovery Survey in 2010– 54 of the MCONs receive a “pass” – no fields associated with TEOR– 8 MCONs receive a “fail”

• Cold Lake Blend - Canada• Peace River Heavy - Canada• Seal Heavy - Canada• Duri - Indonesia• BCF-17 - Venezuela • Cerro Negro (New name Monagas 18) - Venezuela• Monagas 18 (Formerly Cerro Negro) - Venezuela• Tia Juana Light - Venezuela

– 1 “unknown” grade for Western Canadian Select – but “fails” upgrade– Oman Blend false “pass” becomes a “fail”

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Likely same MCON

Oman TEOR Example

• At least 144,000 b/d crude oil production from TEOR– 40 KB/D at Qarn Alam

• Thermally assisted gas/oil gravity drainage (TAGOGD)

– 104 KB/D at Al Mukhaizna

• Modified SAGD

• 18% of Oman Blend• TEOR projects expected

to increase to nearly 300 KB/D by 2012

2/17/2011 14

Source: Petroleum Development Oman (PDO)

TEOR Screen – Issues• O&GJ 2010 Enhanced Oil Recovery Survey

– Does not capture all EOR projects– Is a voluntary survey that occurs every two years

• Other industry information resources may need to be reviewed to expand scope of coverage to identify other active TEOR projects– Heavy oil organizations – Oil Sands Developers Group– Company reports for organizations involved in TEOR work

• Bottom line, TEOR activity will continue to increase– MCONs that have received a “pass” grade may merit a “fail” based on

future projects over the near and mid-term periods

• Some MCONs are only fractional TEOR– Should there be some lower-level “pass”?

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100.0% 100.0%

80.0%

100.0%

17.7% 19.7%

0.4% 0.4% 1.9%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Cold Lake Blend

Canada

Peace River Heavy

Canada

Seal Heavy Canada

Duri Indonesia

Oman Blend Oman

BCF-17 Venezuela

Cerro Negro Venezuela

Monagas 18 Venezuela

Tia Juana Light

Venezuela

MCONs – TEOR Portion (less diluent)

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Source: CEC Analysis.

Cerro Negro/Monagas 18 “fails” upgrade screen.

Exact portion of Seal Heavy that is cold production is uncertain.

Mining/Upgrade Screen – Initial Results• 4 MCONs sourced from bitumen mines & “fail” screen

– All are upgraded as part of the extraction process• Albian Heavy Synthetic – Canada• Premium Albian Synthetic (PAS) - Canada• Syncrude Sweet Premium (SSP) - Canada• Western Canadian Select - Canada

• 8 additional MCONs are processed by upgraders & “fail” screen– All in Venezuela

• Cerro Negro (New name Monagas 18)• Hamaca • Monagas 18 (Formerly Cerro Negro)• Petrozuata • Sincor (New name Zuata Sweet)• Zuata• Zuata Medium• Zuata Sweet (Formerly Sincor)

2/17/2011 17

Likely same MCON

Likely same MCON

191

47

4

3 24 6

Pass

Fail Flaring Only*

Fail Substantial TEOR Only

Fail Partial TEOR Only

Fail Partial TEOR & Upgading

Fail Mining & Upgrading

Fail Upgrading Only

Summary of Screening Results

2/17/2011 18

Source: CEC Analysis.

* Drops to 35 if EIA oil production & updated NOAA data used to calculate flaring intensity

Continuing Work - Confidential Survey

• CEC Petroleum Industry Information Reporting Act request– Most recent period (January 2008 through December 2010)– EIA-856 data due first couple of weeks of March– Will use information to verify MCON imports and volumes

2/17/2011 19

Version No.: 20010.01

Page of

EIA ID NUMBER:

Report Period:

Date submitted:(d) (e) (f) (h) (I) (k) (m) (n) (o) (p)

Port Date of Con- Acquisi- Other LandedDate of of Landing tract/Point tion Price Cost Cost Days

Crude Type Gravity Loading Desti- (YYMM) Code ($/BBLs) ($/BBL) ($/BBL) Credit N(YYMMDD) nation

Form Approved

MONTHLY FOREIGN CRUDE OIL ACQUISITION REPORTFORM EIA-856

PART III. TRANSACTIONS

OMB Number: 1905-0174 Expiration Date: 12/31/2012

(l)(c) (j)Volume

Loading(BBLs)

Acquired Trans-

Country/ Port

ber actionNum- Trans- Crude Code of

(g)

action

(a) (b)

VesselType of

Name of Vendor

(q)

Continuing Work – Additional MCONs

• California Energy Commission has requested companies to provide a confidential list of additional MCONs that do not appear on the current list of 257

• CEC will characterize each MCON using various resources• Potential HCICO screens will be performed• Work will continue over the next couple of months• Revised list and screening results will be provided once the work

has been completed• “Sanitized” list of MCONs will be provided to the Expert Working

Group members next week– No fields– “Masked” O&GJ flaring intensity values – above & below 10 m3/bbl

2/17/2011 20

Additional Q&A

2/17/2011 21

Long-tailed Sylph, San Isidros, Eastern Ecuador – October 14, 2010