US Oil Refinery Fexibility

[Gordon Furbush + 2]

I only follow the news around US refineries from an investor's perspective, so forgive me for asking stupid questions:

Why are US refineries so dependent on Saudi sour crude?

Why can't the US refine its own oil?  (Or is it that we just have minimal capacity?)

Is anyone working on designing and building a refinery that is less dependent on the grade and sulfur content of the oil?

Edited May 4, 2020 by Gordon Furbush

[canadas canadas + 136]

There was a gradual decline of sweet crude oil resources in the U.S. over time so that a shift to sour crude was being made over several years since it was more abundant.  Then shale fracking changed things in the U.S. and made sweet crude oil more abundant again. Generally, sweet crude oil is scarcer than sour crude oil which is more abundant in most of the world.

Edited May 4, 2020 by canadas canadas

[Gordon Furbush + 2]

That bolsters the argument that we need to build refineries that are more flexible.  Can we isolate particular parts of a refinery that are dependent on the grade and other characteristics of the oil?  Can these parts be componentized and swapped as needed?  Or better yet, be redesigned to adjust to the characteristics of any type of oil?

Edited May 4, 2020 by Gordon Furbush

[Enthalpic + 1,496]

1 hour ago, Gordon Furbush said:

That bolsters the argument that we need to build refineries that are more flexible.  Can we isolate particular parts of a refinery that are dependent on the grade and other characteristics of the oil?  Can these parts be componentized and swapped as needed?  Or better yet, be redesigned to adjust to the characteristics of any type of oil?

Not profitably from my understanding.

It is difficult and expensive -but not impossible- to make heavier fractions from light oil or petroleum gas. 

For example, think of the price differential between regular and fully synthetic motor oil... you don't burn synthetic lubricants on purpose.

Edited May 4, 2020 by Enthalpic

[Gordon Furbush + 2]

So, if I understand correctly, you can get a wider variety of petroleum end products from heavier oil.  That suggests it makes sense to have specialized refineries that process WTI into lighter products, such as gas and propane.  Do we have such refineries and can they produce lighter products at the same scale as the refineries built to process heavier grade oil?

Of course, under the current circumstances, these questions are moot.  But are relevant when looking into the future of oil refining.  To be truly energy independent, the US needs the ability to refine its own oil.

[Richard Snyder + 70]

Check what the new refineries will be doing;

www.meridianenergyinc.com

Engineering green refineries primarily for shake, and built close to the source.

[BenFranklin'sSpectacles + 762]

On 5/4/2020 at 7:52 PM, Richard Snyder said:

Check what the new refineries will be doing;

www.meridianenergyinc.com

Engineering green refineries primarily for shake, and built close to the source.

The link isn't working for me.  Is it broken?

[ceo_energemsier + 1,818]

On 5/4/2020 at 2:55 PM, Gordon Furbush said:

I only follow the news around US refineries from an investor's perspective, so forgive me for asking stupid questions:

Why are US refineries so dependent on Saudi sour crude?

Why can't the US refine its own oil?  (Or is it that we just have minimal capacity?)

Is anyone working on designing and building a refinery that is less dependent on the grade and sulfur content of the oil?

Decades  ago pre-shale, US production was in a decline and most refineries were built even before that were designed and configured to run heavy medium and some light crudes like Arabian Light but mostly sour crudes with higher sulphur because that is what was readily available. Since the shale boom , the supply of light sweet low sulphur crudes has been abundant . Most integrated oil companies and also some independents have expanded their refining capacities and added units to process the shale crudes coming out of the eagle Ford, Permian , Bakken and other basins. So yes , US refineries are refining a lot of US crude now and will be adding capacities to include more US crude. You can see the US crude oils replacing imported barrels.

Refineries are also capable of blending various crude oils to obtain an end product slate to meet their customer and market demands. There is no refinery that will just process only one type of crude oil , so there you go a given refinery will use a wide range of crude oil streams to blend and refine including heavy sour, medium sour, light sweet, shale crudes, medium sweet and so on and even condensates and even other distillates.

You can build a refinery just to run sweet shale crude oil.

A new refinery was built in ND to run the Bakken crude and provide certain fuels for the local market but with the Bakken boom that slowed, the demand for the fuels in the oilfields and other industries dropped and that refinery was shuttered as the owners were losing $$$ and now that refinery has been repurposed or in the process of being repurposed.

 

We are building a 'custom" fuels refinery along the USGC and another one as well, that will be using shale crude oils for producing ultra clean fuels.

With some new technologies that have come into the picture, investing in a refinery, which costs a lot of money , now seems not so essential. The new techs can reduce the costs dramatically and with a lot smaller environmental foot print than a refinery , are more feasible and suitable for operations in today's environment, pun intended, while producing ultra clean low emissions fuels.

 

 

[Eric Gagen + 713]

@Gordon Furbush You got some great answers already, and the answer to your question "Is anyone working on designing and building a refinery that is less dependent on the grade and sulfur content of the oil?" The answer is 'all the time, but at what cost?'

A refinery is built to most efficiently take certain types of oil in, and a certain mix of products out.  a thought experiment with some realistic numbers shows what happens when you try to make changes Hypothetically, lets say that you have a refinery which is set up to take in 100,000 bbls of oil a day:  2/3rds heavy oil, and 1/3rd light oil, and convert it into 2/3rds gasoline, and 1/3rd diesel (this is something not to far away from what the average US refinery in the US gulf coast is set up to do) Now lets change the mix coming into the refinery to 1/3rd heavy oil, and 2/3rds light oil.  The piece of the refinery that used to process the heavy oil is now running at 1/2 capacity, but you don't need to use it at all for the light oil, and the investment you made in it is wasted. 

But wait - there's more!  The part of the refinery that is set up to work with light oil is now being asked to run at double the 'normal' rate, and it's too small - it's sized for 33,000 bbls only.  So you can't take the light oil. So you take in 33,000 bbls of light oil and only 16,700 bbls of light oil - your refinery set up to run 100,000 bbls a day is only running and making 50,000 bbls a day, so 1/2 of the cost of the refinery (and running it) is now wasted. Worse yet, your cost of running the refinery doesn't fall by 1/2.  If you have equipment running and people monitoring it,  you can't suddenly turn it off, or send them home just because half as much stuff is flowing through it.  You just have to eat the costs, and live with it.  

You reasonably ask:  Why not keep the same 33,000 bbls of heavy oil, and add the 33,000 bbls of light oil to it so that it can at least run at 67% capacity?  The reason you can't do this is that it will change the mixture of products that are coming OUT of the refinery.  If the market you are supplying still wants twice as much gasoline as diesel, you can't change the ratio of the different oils coming in, and still have the same ratio or products coming out.  

I am oversimplifying.  In real life, refineries try really hard to be more flexible, and have a lot of 'tricks' to shuffle things around, reduce costs, change throughput feedstocks, etc. but the basic principal still stands - you can't put different stuff into the refinery and expect the same stuff the come out the other end without a bunch of fancy and expensive equipment, which is likely to be idle or excess to needs a lot of time.  

If/when the volumes of oil coming in settle down the refineries will adjust, but it takes time.  Give it 10 years, and they will have adjusted to the current 'excess' of sweet oil and 'shortage' of heavy crude and will be dealing with some other problem.  

[Sebastian Meana + 278]

On 5/4/2020 at 5:55 PM, Gordon Furbush said:

I only follow the news around US refineries from an investor's perspective, so forgive me for asking stupid questions:

Why are US refineries so dependent on Saudi sour crude?

Why can't the US refine its own oil?  (Or is it that we just have minimal capacity?)

Is anyone working on designing and building a refinery that is less dependent on the grade and sulfur content of the oil?

In the 70s and 80s Refiners assumed they would get in the future ever sourer and heavier crude grades as the feedstock for transportation fuels, Mexican heavy crude, Venezuelan and Canadian Tar sands, Iraq heavy oil, and so on, so they retrofited at great cost refineries with cracking units, isomerization unit, coker breakdown units, and so on, to make Gasoline and sulfur free diesel from heavy sour crude blends, the average complexity index of refineries in the USA is around 12, while in europe is under 9.

But most oil discoveries and new production is super-sweet, super and ultra light crude oil from natural gas fields that make 1 ton of gas and 1 ton of oil (purely oil fields are a rare discovery nowadays), not only in the USA but also Russia, Iran, Saudi Arabia, Qatar, Mexico.

A barrel of heavy sour crude cost less than a barrel of sweet light crude, but a barrel of heavy crude can make 15% more diesel, gasoline, and jet  fuel than sweet light crude, buy cheap, sell expensive, so making gasoline from sweet light crude is more expensive even if the refinery is cheaper, to not say that you would make waaay more gasoline if you take a heavy crude refinery and made it run on extra-light crude, which would depress prices and you make even less money.

So... The USA imports sour heavy bad quality crude and exports high quality sweet crude, thats 2/5 of the USA international exports outside NAFTA, Sweet light crude only makes sense if you are going to make crude-to-chemical refineries to make hundreeds if not thousands of chemical feedstocks with very selective chemistry synthesis

There are refineries that are indeed being reconverted to use mostly Sweet American Crude, but they will produce less diesel fuel, and less gasoline, in exchange for more petrochemicals,  the first thing that cames to my mind is Valero's Corpus Christi refinery in texas, also refining is a razon thin profit business if you have to buy your crude oil, Valero gross profit margin is 4%, their net profit is around 2%, if you make 10% margin on refining consider yourself a genius, so isnt like Valero is desperate to spend tens of billions converting their 16 refineries to run on American light crude.

Building refineries isnt cheap a State of the Art high conversion refinery easily costs 60,000U$D per Barrel of throughput, thats why if the USA will refine gasoline diesel and kerosene in the future it will not come from oil, but from natural gas, like Nacero's projects in Texas, Arizona and Pennsylvania ,a ton of natural gas is 1/2 to 1/3 the cost of Oil.

Edited November 2, 2021 by Sebastian Meana