John Jechura – [email protected]: January 4, 2015
Petroleum Production, Transportation, & Refining
Topics
• Energy consumption & petroleum’s place
• Oil reserves
• Oil sources & production
• Pipelines
• Petroleum Refining
3
Energy Markets Are Interconnected
5
https://publicaffairs.llnl.gov/news/energy/energy.html
Petroleum Pathway
6
Crude Production Crude Transportation Crude Refining
Crude Storage & Transportation Retail Distribution Consumer Use
Worldwide trade of refined products• In general, United States prefers
gasoline to diesel whereas the rest of the world prefers diesel to gasoline
FCC‐based refineries will still produce a great deal of gasoline even when trying to maximize diesel production. Foreign incentive to ship excess gasoline to US, especially to the East Coast from Europe.
• 2008 gasoline imports suppressed the cost of gasoline relative to crude oil
US refineries increasing the installation of Hydrocracking to produce diesel for export, especially along the Gulf of Mexico
7
Ref: Valero, UBS Global Oil and Gas Conference, May 21‐22, 2013
Oil Producing Locations
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Proven Oil Reserves
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Hubert’s Peak
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Hubert’s Peak
12
Origins of Oil & Gas
• Organic life buried in sedimentary rock
• Transformation to hydrocarbons
• Migration from source rocks
• Accumulation of oil & gas
• Flow of oil & gas through porous media
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Types of Oil Traps
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http://www.maverickenergy.com/oilgas.htm
Characteristics of Reservoir Rock
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Porosity Permeability
http://www.maverickenergy.com/oilgas.htm
Oil Production
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http://www.maverickenergy.com/oilgas.htm
Well Completions
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Perforating Acidizing
Fracturing
http://www.maverickenergy.com/oilgas.htm
Rotary Drilling Rig
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http://www.britannica.com/EBchecked/topic‐art/1357080/113917/A‐land‐based‐rotary‐drilling‐rig
Beam Pumping Unit
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http://www.britannica.com/EBchecked/topic‐art/37157/113919/The‐artificial‐lift‐of‐petroleum‐with‐a‐beam‐pumping‐unit
Directional & Horizontal Wells
• Directional drilling can get you to pay zones that you normally couldn’t reach
• Horizontal wells can expose a much greater drainage area – especially valuable in a tight reservoir
• Cost per well is 2X – 3X that of vertical well but productivity can be 15X – 20X.
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http://www.horizontaldrilling.org/
Unconventional Resources• Petroleum & natural gas formed from decomposing organic matter in “source rock”
• Conventional – gas & liquids migrate through permeable rock toward the surface until it is stopped by some trapping mechanism
• Unconventional – gas & liquids are trapped at the source rock because of extremely low permeabilities
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Dec. 5, 2012 update, http://www.eia.gov/energy_in_brief/article/about_shale_gas.cfm
What is hydraulic fracturing?
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Source: ProPublica, http://www.propublica.org/special/hydraulic‐fracturing‐national
What is hydraulic fracturing?
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http://c1wsolutions.wordpress.com/2014/07/30/a‐solution‐to‐frackings‐water‐problems/
Major tight‐oil production in U.S.
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http://www.economist.com/news/united‐states/21596553‐benefits‐shale‐oil‐are‐bigger‐many‐americans‐realise‐policy‐has‐yet‐catch/
Canadian Oil Sands• Heavy oils produced by various technologies
Surface mining & hot water extraction
In situ heating
• CSS (Cyclic Steam Stimulation)
• SAGD (Steam Assisted Gravity Drainage)
Upgrading
• Exported product much lighter than feedstock
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http://www.ogj.com/unconventional‐resources/oil‐sands.html
http://newenergyandfuel.com/http:/newenergyandfuel/com/2009/08/12/making‐syncrude/
http://www.bp.com/sectiongenericarticle.do?categoryId=9036694&contentId=7067647
Oil Platforms
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Deep Sea Production
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Major U.S. Pipelines
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Proposed Keystone Pipeline Expansion
• Keystone XL Pipeline important to bring oils sands & northern tight oil to Gulf Coast
• Section south from Cushing important to improve flow of all mid‐continent oil.
Started flow early 2014, up to 700,000 bpd capacity
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http://www.washingtonpost.com/wp‐srv/special/nation/keystone‐xl‐map/
How Pipelines Work
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Association of Oil Pipelines, http://www.aopl.org/aboutPipelines/?fa=howPipelinesWork
Batching in Product Pipelines
• Goal is to minimize product downgrade during shipping
• Preferred sequence to ship these products our of refinery:
• Considerations
Interface between the two gasolines can be “downgraded” to the 87 octane (because of octane effects)
Interface between the ULSD & Heating Oil can be downgraded to the Heating Oil (because of sulfur effects)
Interface between 87 octane gasoline & ULSD have similar sulfur contents but different boiling point properties – typically returned to refinery for additional processing – “transmix”
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RefinerLink, http://www.refinerlink.com/blog/Pipelines_Ship_Refinery_Products_to_Pump/
Louisiana Offshore Oil Port (LOOP)
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http://blog.nola.com/tpmoney/2009/05/louisiana_offshore_oil_port_is.html
http://www.economicpopulist.org/content/gustav‐eying‐gulf‐oil‐and‐loop
Transportation Infrastructure is Key
• Keystone XL Pipeline important to bring oils sands & northern tight oil to Gulf Coast
Section south from Cushing important to improve flow of all mid‐continent oil. Started flow early 2014, up to 700,000 bpd capacity
• Rail has become preferred method to bring incremental barrels out of Bakken & Eagle Ford
Safety concerns – train derailments July 2013 Quebec (40 dead) & December 2013 ND
Concerns about increased emissions, especially in California
ANSI & API released new recommended practices for shipping crude by rail (ANSI/API Recommended Practice 3000) in September 2014
• Available for free at this web page
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http://www.washingtonpost.com/wp‐srv/special/nation/keystone‐xl‐map/
http://www.cpr.ca/en/ship‐with‐cp/where‐you‐can‐ship/bakken‐shale/Documents/bakken.pdf
Transportation by Rail in U.S.
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https://www.aar.org/keyissues/Documents/Background‐Papers/Crude‐oil‐by‐rail.pdf
Each rail car holds about 30,000 gal (714 bbls)
http://peoriastation.blogpeoria.com/2012/03/24/bnsf‐galesburg‐yards‐new‐tracks‐are‐in‐service/
What Does Tight Oil Mean for U.S. Refiners?• Until Marketlink pipeline (southern leg of Keystone XL) operational expect prices for Mid
Continent crude oils to be below market
January 2014 expected to start shipments
• Tight oil production should ensure domestic supply to refineries needing sweet crude in the next 10 – 15 years
Expected to peak @ 4.8 million bpd in 2021(EIA, Dec. 2013)
• Recent investments to allow refiners to process heavy sour crudes might limit the ability to utilize tight oil
Exporting tight oil while importing heavy oil is very possible if permitted by U.S. government
• Environmental concerns could put the brakes on this production
High energy requirements for producing Canadian oil sands
High water quantities needed for tight oil & oil sands production
Public concerns about hydraulic fracturing
Public concerns about oil transport by rail
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http://www.hydrocarbonprocessing.com/Article/3223989/Channel/194955/Innovative‐solutions‐for‐
processing‐shale‐oils.html
World & U.S. Refining Capacity
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EIA, Jan. 1, 2014 database, published June 2014http://www.eia.gov/petroleum/refinerycapacity/
“Western Europe leads global refining contraction”, Oil & Gas Journal, pp 34‐48, Dec. 2, 2013
Number & Capacity of World & U.S. Refineries
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Source: EIA, Jan. 1, 2014 database, published June 2014
http://tonto.eia.doe.gov/dnav/pet/pet_pnp_cap1_dcu_nus_a.htm
“Western Europe leads global refining contraction”, Oil & Gas Journal, pp 34‐48, Dec. 2, 2013
Crude Oil as Refinery Feedstock
• Crude Oil
Complex mixture of hydrocarbons & heterocompounds
Dissolved gases to non‐volatiles (1000F+ boiling material)
C1 to C90+
• Composition surprisingly uniform
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Element Wt%
Carbon 84 ‐ 87
Hydrogen 11 ‐ 14
Sulfur 0 ‐ 5
Nitrogen 0 ‐ 0.2
Other elements 0 ‐ 0.1
Primary Hydrocarbon Molecular Types
• Paraffins Carbon atoms connected by single bond Other bonds saturated with hydrogen
• Naphthenes Ringed paraffins (cycloparaffins) All bonds saturated with hydrogen
• Aromatics Six carbon ring (multiple bonding) All bonds are unsaturated
• Olefins Usually not in crude oil Formed during processing At least two carbon atoms connected by
double bond
H
H
H
H
H
H
Benzene
H
H
H
H H
H
H
H
1-Butene
CH3
TolueneToluene
HH
HH
HH
HH
HH
HH
CyclohexaneCyclohexane
n-Butane
H
HH
HH
HH
H
HH
n-Butane n-Butanen-Butane
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Example Heterocompounds
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Composition & Analysis of Heavy Petroleum FractionsK.H. Altgelt & M.M. BoduszynskiMarcel Dekker, Inc., 1994, pg. 16
Petroleum Refining Technology & Economics – 5th Ed.by James Gary, Glenn Handwerk, & Mark Kaiser, CRC Press, 2007
Characteristics of Petroleum Products
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Refining Overview – Petroleum Processes & Products, by Freeman Self, Ed Ekholm, & Keith Bowers, AIChE CD‐ROM, 2000
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0
10
20
30
40
50
60
70
80
90
100
Total Continuum Fractions
Bar
rels
Ethane & Lighter
Propane
Butanes
Pentanes
Light Naphtha
Heavy Naphtha
Distillate
AGO
LVGO
HVGO
Vacuum Resid
97.8°F
180°F
350°F
400°F
650°F
1050°F
850°F
Crude Oils Are Not Created Equal
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Petroleum Products
There are specifications for over 2,000 individual refinery products
Intermediate feedstocks can be routed to various units to produce different blend stocks
• Depends upon the local economics & contractual limitations
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Ref: Unknown origin. Possibly Socony‐Vacuum Oil Company, Inc. (1943)
Raw Crude vs. Refined Product
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Petroleum Products• Refinery Fuel Gas (Still Gas)
• Liquefied Petroleum Gas (LPG)
Ethane & Ethane‐Rich Streams
Propanes
Butanes
• Gasoline
Naphtha
• Middle Distillates
Kerosene
Jet Fuel
Diesel, Home Heating, & Fuel Oil
• Gas Oil & Town Gas
• Lubricants
• Wax
• Asphalt & Road Oil
• Petroleum Coke
• Petrochemicals
• Sulfur
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EIA, refinery yield – updated April 20, 2014http://tonto.eia.doe.gov/dnav/pet/pet_pnp_pct_dc_nus_pct_m.htm
Motor Gasoline Volatility Classes (ASTM D 4814‐13)
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What are Octane Numbers?
• References:
iso‐octane 100 (2,2,4‐trimethylpentane)
n‐heptane 0
• Tendency for auto‐ignition upon compression
Gasoline — bad
Tendency of gasoline to cause “pinging” in engine
Higher octane needed for higher compression ratios
• Different types (typically RON > MON)
RON — Research Octane Number
• Part throttle knock problems
MON —Motor Octane Number
• More severe — high speed & high load conditions
(R+M)/2 – Road Octane Number
• Average of MON & RON
• Reported at the pump
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n-Heptanen-Heptane
iso-Octaneiso-Octane
‐60
‐40
‐20
0
20
40
60
80
100
120
140
0 50 100 150 200 250 300 350 400 450 500
Boiling Point [°F]
Research Octan
e Num
ber
Aromatics
Naphthenes
Olefins & Cyclic Olefins
Iso‐paraffins
Normal Paraffins
0
50
100
150
200
250
300
350
1997 1998 1999 2000 2001 2002 2003 2004 2005
Sulfu
r (pp
m)
Averaged Summertime ParametersAveraged Wintertime Parameters
Conventional Gasoline
Reformulated Gasoline
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1997 1998 1999 2000 2001 2002 2003 2004 2005
Benz
ene
(vol
%)
Averaged Summertime ParametersAveraged Wintertime Parameters
Conventional Gasoline
Reformulated Gasoline
0
5
10
15
20
25
30
1997 1998 1999 2000 2001 2002 2003 2004 2005
Aro
mat
ics
(vol
%)
Averaged Summertime ParametersAveraged Wintertime Parameters
Conventional Gasoline
Reformulated Gasoline
0
2
4
6
8
10
12
14
1997 1998 1999 2000 2001 2002 2003 2004 2005
Ole
fins
(vol
%)
Averaged Summertime ParametersAveraged Wintertime Parameters
Conventional Gasoline
Reformulated Gasoline
http://epa.gov/otaq/regs/fuels/rfg/properf/rfg‐params.htm
Middle Distillates• General classifications
Kerosene
Jet fuel
Distillate fuel oil
• Diesel
• Heating oil
• Properties
Flash point
Cloud point / Pour point
Aniline point
Cetane number
Viscosity
Water & sediment
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What are Cloud & Pour Points?
Indicate the tendency to form solids at low temperatures – the higher the temperature the higher the content of solid forming compounds (usually waxes)
• Cloud Point
Temperature at which solids start to precipitate & give a cloudy appearance
Tendency to plug filters at cold operating temperatures
• Pour Point
Temperature at which the oil becomes a gel & cannot flow
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Solidification of diesel fuel in a fuel‐filtering device after sudden temperature drop“Consider catalytic dewaxing as a tool to improve diesel cold‐flow properties”, Rakoczy & Morse, Hydrocarbon Processing, July 2013
Melting Points of selected long‐chain normal & iso paraffinstypically found in middle distillates
Comparison of Boiling Ranges
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Product Economics — Crack Spread
• Estimates the value added by refining as an industry• 4 standard spreads 5‐3‐2
• 5 bbl crude 3 bbls gasoline + 2 bbls heating oil/diesel
3‐2‐1• 3 bbl crude 2 bbls gasoline + 1 bbls heating oil/diesel
2‐1‐1• 2 bbl crude 1 bbls gasoline + 1 bbls heating oil/diesel
6‐3‐2‐1• 6 bbl crude 3 bbls gasoline + 2 bbls heating oil/diesel + 1 bbl residual fuel oil
• Rule of thumb for profitable operating environment Long held view – greater than $4 per bbl as strongly profitable Current view – should be greater than $9 per bbl to be profitable
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Crack Spread Calculation
• Example — Bloomberg, 1/4/2015
Prices
• WTI Cushing Spot $52.69 per bbl
• Brent $56.42 per bbl
• RBOB Gasoline $1.4334 per gal
• Heating Oil $1.7957 per gal
5‐3‐2 Spreads
• WTI:
• Brent:
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42 3 1.4334 2 1.7957 5 52.69$13.60per bbl
5
42 3 1.4334 2 1.7957 5 56.42$10.09per bbl
5
http://www.bloomberg.com/energy/
Prices Are Crude Specific
61
Ref: Statistics, Oil & Gas Journal, January 27, 2014
Historical Crude Prices & Margins
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Updated Jan. 2, 2015Source: http://tonto.eia.doe.gov/dnav/pet/pet_pri_spt_s1_d.htm
Prices Are Crude Specific
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EIA published monthly production data– updated Jan. 2, 2015http://www.eia.gov/dnav/pet/pet_pri_spt_s1_m.htmhttp://tonto.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=IMX2810004&f=M
Historical Crude Prices & Crack Spreads
64
Updated Jan. 2, 2015Source: http://tonto.eia.doe.gov/dnav/pet/pet_pri_spt_s1_d.htm
Historical Crude Prices & Crack Spreads
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Updated Jan. 2, 2015Source: http://tonto.eia.doe.gov/dnav/pet/pet_pri_spt_s1_d.htm
Description of Petroleum Refinery
• Manages hydrocarbon molecules
• Organized arrangement of manufacturing processes
Provide physical & chemical change of crude oil
Salable products with specifications & volumes as demanded by the marketplace
• Complete refinery will include:
Tankage for storage
Dependable source for electric
power
Waste disposal & treatment
facilities
Product blending facilities
Around the clock operations
Conversion units
66
Petroleum Refinery Schematic
67
Petroleum Refinery Schematic
68
Petroleum Refinery Block Flow Diagram
Light Naphtha
CrudeOil Desalter
Atmos-pheric
Distillation
Vacuum Distillation
Gas Separation
& Stabilizer
Solvent Deasphal-
ting
Coking
Visbreak-ing
Fluidized Catalytic Cracking
Hydro-cracking
NaphthaReform-
ing
Isom-erization
Sat Gas Plant
Polymer-ization
Alkyla-tion
NaphthaHydro-treating
Treating & Blending
Coke
Fuel Gas
LPG
Aviation Gasoline
Automotive Gasoline
Solvents
Jet Fuels
Kerosene
Solvents
Heating Oils
Diesel
ResidualFuel Oils
Lubricant
Greases
Waxes
Asphalts
HeavyNaphtha
Kerosene
Distillate
AGO
LVGO
HVGO
VacuumResiduum
CatDistillates
Gas Oil Hydro-treating
DAO
Isomerate
Gas
AlkylFeed
Alkylate
PolymerizationNaphtha
Gases
Butanes
LPG
Reformate
Naphtha
Fuel OilBottoms
Distillates
DistillateHydro-treating
CatNaphtha
Cycle Oils
SDABottomsCoker
Naphtha
HeavyCokerGasOil
Light CokerGas Oil
SulfurPlant
Sulfur
Naphtha
Fuel Oil
SolventDewax-
ing
Lube Oil
Waxes
70
Catalytic Cracking
• Catalytically crack carbon‐carbon bonds in gas oils Fine catalyst in fluidized bed reactor allows for immediate regeneration
Lowers average molecular weight & produces high yields of fuel products
Produces olefins• Attractive feed characteristics Small concentrations of contaminants
• Poison the catalyst Small concentrations of heavy aromatics
• Side chains break off leaving cores to deposit as coke on catalyst
• Must be intentionally designed for heavy resid feeds
• Products may be further processed Further hydrocracked Alkylated to improve gasoline anti‐knock properties
72
Naphtha Reforming• Purpose to enhance aromatic content of
naphtha Improve the octane rating for gasoline Hydrogen as by‐product
• Used in hydrotreating to remove sulfur & nitrogen
• Primary reactions DehydrogenationNaphthenes→ Aroma cs IsomerizationNormal Paraffins → Branched Isoparaffins
• Reformate desirable for gasoline but … High octane number, low vapor pressure, very low sulfur levels, & low olefins concentration US regulations on levels of benzene, aromatics, & olefins – air quality concerns
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CH3 CH3
+ 3 H2
Dehydrogenation
+ H2
Dehydrocyclization
CH3
CH3
CH3
CH3
+ H2
Isomerization
CH3CH3
CH2
CH3CH3
Delayed Coking
• Process heavy residuum to produce distillates (naphtha & gas oils) that may be catalytically upgraded
Hydrotreating, catalytic cracking, and/or hydrocracking
• Attractive for heavy residuum not suitable for catalytic processes
Large concentrations of resins, asphaltenes, & heteroatom compounds (sulfur, nitrogen, oxygen, metals)
• Metals, sulfur, & other catalyst poisons generally end up in coke
Sold for fuel & other purposes
• Carbon rejection process
Fired Heater
Fractionator
Coke Drums
Gas
Naphtha
Light Gas O
Heavy Gas O
Fresh Feed
Steam
Coke
75