The following Turning Point blog is provided by Dennis Sutton. Following a 40-year career with Marathon Petroleum, Dennis is now the Executive Director of the Crude Oil Quality Association (COQA) and is a Principal in the consulting firm, PetroQual.
The words of Mick Jagger, Keith Richards and the Rolling Stones reflect the feelings of many midcontinent refiners recently as they have expressed their concerns processing WTI crude oil to both the American Fuel & Petrochemical Manufacturers (AFPM) and the Crude Oil Quality Association (COQA). Since WTI/Domestic Sweet is one of the highest volume domestic sweet crude grades, it is important that refiners know what they are receiving and can optimize their operations and consistently produce on-spec products. Crude quality issues have been raised regarding multiple parameters. With crude prices remaining low and pressure on producers to keep production up, only time will tell how the refiners manage the challenges.
A little background
Historically, West Texas Intermediate (WTI), also sometimes called Domestic Sweet, has been a mixture/blend of domestic, sweet crude produced in western Texas and surrounding areas. The CME Group/NYMEX defines quality specifications in Chapter 200 of their light, sweet crude oil futures contract. The current specs include viscosity, Reid Vapor Pressure (RVP), Basic Sediment & Water (BS&W), pour point, API gravity and sulfur. Of these, the two most important parameters and the only two that practically constrain the blend are gravity and sulfur. While gravity and sulfur are important to refiners, they are far from comprehensive in defining the characteristics of a crude oil.
In the 1990s, refiners became increasingly concerned about the quality of Light Louisiana Sweet (LLS), a grade similar to WTI that is traded at St. James, LA. This issue helped to spark the formation of the Refiners Crude Oil Quality Group, which evolved into today’s Crude Oil Quality Association. As a result of these issues, refiners worked with Shell Pipeline (the operator of Capline at the time) to develop and implement more comprehensive specifications for LLS. In addition to gravity and sulfur, these specs included limits on parameters such as: Total Acid Number (TAN), light ends, metals, and boiling range characteristics (as measured by high temperature simulated distillation). These specs are still in force today, monitored regularly, and provide a higher level of knowledge and confidence to refiners than merely API gravity and sulfur.
In the early 2000s, refiners began clamoring for similar specs to be implemented for WTI at Cushing. At the time, the import and blending of high TAN foreign crudes into WTI had been reported and posed a major threat to midcontinent refiners, unprepared for the highly acidic, corrosive crudes; however, with only specs for gravity and sulfur, they were vulnerable. Concerns about metals content in this historically very low metals crude, and yield distribution were also discussed. As a result, the COQA conducted testing, evaluated laboratory capabilities, and proposed specifications to better characterize WTI; however, Cushing is much more challenging than St. James due to the number of companies involved and the pipeline and blending complexity.
In light of these challenges, the COQA specs were chosen and the values set to be:
- Meaningful to refiners;
- Practical to implement;
- Routinely achievable; and
- No hindrance to the market liquidity of the stream.
In a letter dated 10 August 2010, to the CME Group/NYMEX and all other parties involved in the production, transportation, and refining of WTI, the COQA recommended the following specs be added for WTI:
- Micro Carbon Residue (MCRT): 2.4% wt. or less;
- Total Acid Number (TAN): 0.28 or less;
- Nickel: 8 ppm or less;
- Vanadium: 15 ppm or less;
- Light Ends (<220°F by HTSD): Not more than 19% by mass;
- 50% Point by HTSD: 470°F- 570°F; and
- Vacuum Resid (> 1020°F by HTSD): Not more than 16% by mass.
WTI today
Since 2010, much has changed. Logistically, the reversal of Seaway Pipeline means no foreign (non-North American) imports come to Cushing; however, the tremendous growth of shale play crude has resulted in increasing quantities of very light, very paraffinic crude coming into the WTI pool at Cushing. Additional pipeline connectivity from the North has brought heavy Canadian grades to Cushing. WTI is now flowing into the Houston market from Cushing through the reversed Seaway system, as well as bypassing Cushing through Longhorn and BridgeTex systems.
As the price of crude has plummeted, producers and blenders look for creative ways to blend WTI, with API gravity and sulfur being the two primary parameters to which they necessarily blend.
While data provided by the COQA (http://www.coqa-inc.org/meeting-archives) shows that in general, the more comprehensive specs are being met, they have never been formally adopted by NYMEX. Thus, some blenders may choose to blend to only gravity and sulfur, resulting in “dumbbell” WTI that contains very high amounts of light condensate and high amounts of heavy residuum material.
The most egregious incident reported involved a refiner who discovered that one of their customers was purchasing vacuum tower bottoms (VTB), driving only a short distance from the refinery and reinjecting them into the crude stream with condensate.
Another impact of the new production and changing blending schemes is the problem of asphaltene precipitation in WTI. Historically, WTI is a very low asphaltene crude, and those asphaltenes naturally occurring in the crude are held in solution by the other constituents; however, recent data presented by Irv Wiehe of Soluble Solutions shows that in the last few years, a growing number of WTI samples have been found to be “self-incompatible.” This means that the asphaltenes are precipitating out before the crude even arrives at the refinery, resulting in increased fouling and refinery maintenance.
To summarize, refiners’ dissatisfaction has focused on three main areas:
- Dumbbell blending, changing the refined products yield and value;
- Asphaltene precipitation, increasing risk of costly solids handling; and
- Elevated metals (particularly vanadium), inflating catalyst costs to meet increasingly stringent motor fuels specifications.
“Cause I try and I try and I try and I try”
With these challenges, what avenues are available for refiners to be more confident of the WTI they are receiving, and be able to optimally process the crude? The first hurdle to solving the problems is to obtain accurate, meaningful quality information.
- The COQA is initiating a project to monitor the quality of WTI in a standardized manner and then to openly publish the data. This would be similar to the highly successful crudemonitor.ca site, managed by Crude Quality Inc. that publishes data on the quality of Canadian crudes. This would provide refiners with more transparent information on the crude they are purchasing. Both AFPM and NYMEX have expressed their support of this effort.
- To obtain a better understanding of the asphaltenes problems, a project is underway, with samples being analyzed by Soluble Solutions. Data from participating companies is being shared with the COQA (with sample identifications blinded) and will be presented at upcoming meetings.
- The COQA continues to recommend the formal adoption of the more comprehensive WTI specifications.
Success in these endeavors will hopefully provide a more satisfying course for WTI refiners!
We would like to thank Dennis for today’s blog and support the work COQA is doing in coordinating efforts in the crude oil quality arena. In the course of our business, Turner, Mason & Company has been involved in a variety of studies and engagements where crude quality issues have been of primary or secondary interest. These issues are only becoming more vital to refiners due to the light tight oil boom, other developments in the upstream, and an environment where product specifications are becoming ever more stringent and wide ranging. We have assisted all segments of the oil industry in responding to these and other developments which impact petroleum markets and also provide in-depth analysis of the impacts in our subscription products. The most recent is the 2016 Crude and Refined Products Outlook, which was released in February 2016. For more details about this publication or other TM&C services, please visit our website, send us an email or give us a call.