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Petroleum Refining Overview Petroleum Refining Overview
TopicsTopics
‣ Energy consumption & petroleum’s place
• Size of U.S. industry
• Major refiners
‣ Petroleum products
‣ Basic petroleum economics
• Trends for crude oil & gasoline prices
• When do refiners make money?
‣ Generalized Petroleum Refinery
TopicsTopics
‣ Energy consumption & petroleum’s place
• Size of U.S. industry
• Major refiners
‣ Petroleum products
‣ Basic petroleum economics
• Trends for crude oil & gasoline prices
• When do refiners make money?
‣ Generalized Petroleum Refinery
U.S. Energy ConsumptionU.S. Energy Consumption
Source: 1850-1949, Energy Perspectives: A Presentation of Major Energy and Energy-Related Data, U.S. Department of the Interior, 1975; 1950-2000, Annual Energy Review 2000, Table 1.3.
0
20
40
60
80
100
120
1750 1800 1850 1900 1950 2000
Ener
gy C
onsu
med
(Qua
d =
10En
ergy
Con
sum
ed (Q
uad
= 10
Ener
gy C
onsu
med
(Qua
d =
10En
ergy
Con
sum
ed (Q
uad
= 10
1515 1515 B
TU)
BTU
) B
TU)
BTU
)
WoodHydroelectric Power
Nuclear Electric Power
Coal
Natural Gas
Petroleum
Program Markets Are InterconnectedProgram Markets Are Interconnected
U.S. Dependence on Foreign OilU.S. Dependence on Foreign Oil
Rate of Use
FranceS. KoreaBrazilCanadaIndiaRussiaGermanyChina
U.S.Japan
Mexico
0% 10% 15% 20%5% 25%
3%3%3%3%3%3%3%
7%
25%7%
3%
Oil Reserves
U.S.NigeriaLibyaRussiaVenezuela
U.A.E.
KuwaitIraqIranCanadaSaudi Arabia
2%2%
3%5%
6%8%8%
9%10%
14%21%
Updated July 2005. Source: International Energy Annual 2003 (EIA), Tables 1.2 and 8.1-O&GJ. Canada’s reserves include tar sands.Source: National Renewable Energy Laboratory
The United States uses more oil than the next five highest-consuming nations combined.
Sources:
U.S. data
Vehicles: U.S. Department of Transportation, Federal Highway Administration, Highway Statistics 2000, Table VM-1, and earlier annual editions.
Population: U.S. Department of Commerce, Bureau of the Census Time Series of National Population Estimates: April 1, 2000 to July 1, 2001
Other countries/regions
Energy Information Administration, International Energy Outlook 2002, DOE/EIA-0484(2002), p. 256.
Vehicles per Thousand PeopleVehicles per Thousand PeopleHistorical U.S. Vehicles per 1000 People
0
100
200
300
400
500
600
700
800
900
1900
1910
1920
1930
1940
1950
1960
1970
1980
1990
2000
Vehicl es per 1000 People
Sources:
U.S. data
Vehicles: U.S. Department of Transportation, Federal Highway Administration, Highway Statistics 2000, Table VM-1, and earlier annual editions.
Population: U.S. Department of Commerce, Bureau of the Census Time Series of National Population Estimates: April 1, 2000 to July 1, 2001
Other countries/regions
Energy Information Administration, International Energy Outlook 2002, DOE/EIA-0484(2002), p. 256.
Vehicles per Thousand PeopleVehicles per Thousand PeopleHistorical U.S. Vehicles per 1000 People
0
100
200
300
400
500
600
700
800
900
1900
1910
1920
1930
1940
1950
1960
1970
1980
1990
2000
United States
Vehicl es per 1000 People
�
�
���
��
China
Africa
Developing Asia
Middle East
Central & S. AmericaFormer USSR
Eastern Europe
� Industrialized Pacific�Western Europe
US Refining CapacityUS Refining Capacity
EIA, Jan. 1, 2009 databasehttp://www.eia.doe.gov/oil_gas/petroleum/data_publications/refinery_capacity_data/refcap_historical.html
Company
Capacity
Barrels per
Calendar Day
Capacity
Barrels per
Stream Day
ConocoPhillips 2,013,000 2,120,881
Valero Energy Corp 2,001,290 2,095,700
ExxonMobil Refining 1,964,350 2,047,650
BP 1,426,370 1,488,700
PDVSA 1,105,750 1,138,350
Marathon Petroleum 1,016,000 1,103,000
Chevron USA Inc 1,033,271 1,100,200
Total 18,249,450 19,291,308
Capacities for LLC refineries split among the partner companies Chevron USA Inc
ConocoPhillips
ExxonMobil Refining
BP
PDVSA
Marathon Petroleum
Valero Energy Corp
Company State Site
Atmospheric Crude
Distillation Capacity
(barrels per stream
day)
Atmospheric Crude
Distillation Capacity
(barrels per calendar
day)
ExxonMobil Refining Texas BAYTOWN 596,400 572,500
Hovensa LLC Virgin Islands KINGSHILL 525,000 500,000
ExxonMobil Refining Louisiana BATON ROUGE 524,000 503,000
BP Texas TEXAS CITY 475,000 455,790
PDVSA Louisiana LAKE CHARLES 440,000 429,500
BP Indiana WHITING 420,000 405,000
Chevron USA Inc Mississippi PASCAGOULA 360,000 330,000
ExxonMobil Refining Texas BEAUMONT 359,100 344,500
Sunoco Pennsylvania PHILADELPHIA 355,000 335,000
Deer Park Refining Ltd Partnership Texas DEER PARK 340,000 329,800
Individual Refinery SizesIndividual Refinery Sizes
Distribution of U.S. Refinery Distribution of U.S. Refinery
CapacitiesCapacities
0
5
10
15
20
25
30
35
40
Less
than 10
Mbpd
10 - 50
Mbpd
50 - 100
Mbpd
100 -
200
Mbpd
200 -
300
Mbpd
300 -
400
Mbpd
400 -
500
Mbpd
Greater
than 500
Mbpd
Number of Opera
ting Refineries
0
1,000
2,000
3,000
4,000
5,000
6,000
Capacity [Mbbl/calendar day]
History U.S. Refinery CapacitiesHistory U.S. Refinery Capacities
254
145
0
50
100
150
200
250
300
198119
8319
8519
8719
8919
9119
9319
9519
9719
9920
0120
0320
0520
0720
09
Number o
f Operating U
S Refineries
0
2
4
6
8
10
12
14
16
18
20
Operating Refinery Capacity [MMbbl/stream day]
Source: http://tonto.eia.doe.gov/dnav/pet/pet_pnp_cap1_dcu_nus_a.htm
Trends in Average U.S. Crude SlateTrends in Average U.S. Crude Slate
Source: Shore, J., “Refining Challenges: Changing Crude Oil Quality & Product Specifications,” Energy Information Administration,
World Fuels Conference, Washington, Sept. 25-28, 2002
Ref: Gunaseelan & Buehler, “Changing US crude imports are driving refinery upgrades, Oil & Gas Journal, Aug. 10, 2009
TopicsTopics
‣ Energy consumption & petroleum’s place
• Size of U.S. industry
• Major refiners
‣ Petroleum products
‣ Basic petroleum economics
• Trends for crude oil & gasoline prices
• When do refiners make money?
‣ Generalized Petroleum Refinery
Petroleum ProductsPetroleum 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
Ref: Unknown origin. Possibly Socony-Vacuum Oil Company, Inc. (1943)
U.S. Refinery and Blender Net U.S. Refinery and Blender Net
ProductionProduction
Source: http://tonto.eia.doe.gov/dnav/pet/pet_pnp_refp_dc_nus_mbbl_m.htm
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Thou
sand
s Ba
rrels
Ann
ually
Thou
sand
s Ba
rrels
Ann
ually
Thou
sand
s Ba
rrels
Ann
ually
Thou
sand
s Ba
rrels
Ann
ually
Miscellaneous Petroleum ProductsStill GasAsphalt and Road OilPetroleum CokeWaxesLubricantsSpecial NaphthasOther Oils for Petrochemical Feedstocks UseNaphtha for Petrochemical Feedstocks UseResidual Fuel OilDistillate Fuel OilKeroseneKerosene Jet FuelAviation GasolineFinished Motor GasolineLiquefied Petroleum Gases
April 2009 U.S. Refinery Yields
Finished Motor Gasoline,
44.8
Aviation Gasoline, 0.1Kerosene-Type Jet Fuel, 9.5
Kerosene, 0.1
Distillate Fuel Oil, 27.4
Waxes, 0
Lubricants, 0.9
Special Naphthas, 0.2
Petroleum Coke, 5.5
Asphalt and Road Oil, 2.5
Still Gas, 4.2
Miscellaneous Petroleum
Products, 0.5
Liquified Petroleum Gases,
5.2
Other Oils for Petrochemical
Feedstock Use, 1.2
Naphtha for Petrochemical
Feedstock Use, 1.3
Residual Fuel Oil, 3.2
About 1.2 ratio of gasoline to
distillate fuels
EIA, refinery yieldhttp://tonto.eia.doe.gov/dnav/pet/pet_pnp_pct_dc_nus_pct_m.htm
U.S. Refinery and Blender Net U.S. Refinery and Blender Net
ProductionProduction
TopicsTopics
‣ Energy consumption & petroleum’s place
• Size of U.S. industry
• Major refiners
‣ Petroleum products
‣ Basic petroleum economics
• Trends for crude oil & gasoline prices
• When do refiners make money?
‣ Generalized Petroleum Refinery
How Much Do Refiners Get for How Much Do Refiners Get for
Gasoline?Gasoline?
Per Gallon Per Barrel
Retail Price $2.63 $110.46
Taxes 15% $0.39 $16.57
Distribution & Marketing 10% $0.26 $11.05
Refining 14% $0.37 $15.46
Crude Oil 61% $1.60 $67.38
Refinery Price $1.97 $82.85
Retail Cost Contributions
Source: http://tonto.eia.doe.gov/oog/info/gdu/gasdiesel.asp
How Much Do Refiners Get for Diesel?How Much Do Refiners Get for Diesel?
Per Gallon Per Barrel
Retail Price $2.53 $106.26
Taxes 18% $0.46 $19.13
Distribution & Marketing 11% $0.28 $11.69
Refining 8% $0.20 $8.50
Crude Oil 63% $1.59 $66.94
Refinery Price $1.80 $75.44
Retail Cost Contributions
Source: http://tonto.eia.doe.gov/oog/info/gdu/gasdiesel.asp
Refinery EconomicsRefinery Economics
‣ When do refiners make money?
• High crude oil prices?
• Low crude oil prices?• It depends!
» Difference between the sale price of the products & purchase price of the crude oil
» Operating costs cut into this margin
Product Economics Product Economics —— Crack SpreadCrack Spread
‣ Estimates the value added by the refining operation
‣ 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 (from Gary & Handwerk)
• Strongly profitable: > $4 per bbl
• Strongly unprofitable: < $3 per bbl
$9 per bbl$9 per bbl
more appropriate more appropriate
valuevalue
Crack SpreadCrack Spread
‣ Example — CNN Financial numbers, 7/27/2009
• Future prices (September 9, 2009 delivery)
� Light crude oil $68.38 per bbl ($1.628 per gal)
� Unleaded Gasoline $1.93 per gal ($81.06 per bbl)
� Heating Oil $1.82 per gal ($ 76.44 per bbl)
• Spreads
� 5-3-2
� 3-2-1
� 2-1-1
× + × − ×=
3 81.06 2 76.44 5 68.38$10.83 per bbl
5
× + × − ×=
1 81.06 1 76.44 2 68.38$10.37 per bbl
2
× + × − ×=
2 81.06 1 76.44 3 68.38$11.14 per bbl
3
Crack SpreadCrack Spread
‣ Example — CNN Financial numbers, 7/2/2008
• Future prices (August 8, 2008 delivery)
� Light crude oil $140.97 per bbl ($3.356 per gal)
� Unleaded Gasoline $3.51 per gal ($147.42 per bbl)
� Heating Oil $3.94 per gal ($165.48 per bbl)
• Spreads
� 5-3-2
� 3-2-1
� 2-1-1
× + × − ×=
3 147.42 2 165.48 5 140.97$13.67 per bbl
5
× + × − ×=
1 147.42 1 165.48 2 140.97$15.48 per bbl
2
× + × − ×=
2 147.42 1 165.48 3 140.97$12.47 per bbl
3
Historical Prices
$0
$25
$50
$75
$100
$125
$150
$175
$200
1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Cushing, OK Crude Oil Future Contract Average
[$/bbl]
0
50
100
150
200
250
300
350
400
450
Gasoline & Distillate Price [¢/gal]
Crude Oil
Regular Gasoline
RBOB Regular Gasoline
No. 2 Heating Oil
Source: http://tonto.eia.doe.gov/dnav/pet/pet_pri_fut_s1_d.htm
0
50
100
150
200
250
300
350
400
450
$0 $25 $50 $75 $100 $125 $150 $175
Cushing, OK, Crude Oil Future Contract Average [$/bbl]
New York Harbor Future Contract Average [¢/gal]
Regular Gasoline
RBOB Regular Gasoline
No. 2 Heating Oil
Source: http://tonto.eia.doe.gov/dnav/pet/pet_pri_spt_s1_d.htm
Historical Crack Spreads
-20
-10
0
10
20
30
40
50
60
1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Crack Spread [$/bbl crude oil]
0
20
40
60
80
100
120
140
160
Cushing, OK Crude Oil Spot Price [$/bbl]
5-3-2 Crack Spread
6-3-2-1
Crude Oil
Historical Crack Spreads
-20
-10
0
10
20
30
40
50
60
2007 2008 2009
Crack Spread [$/bbl crude oil]
0
20
40
60
80
100
120
140
160
Cushing, OK Crude Oil Spot Price [$/bbl]
5-3-2 Crack Spread
6-3-2-1 Crack Spread
Crude Oil
Prices Are Crude SpecificPrices Are Crude Specific
$40.403.3321.8Maya
$53.351.0930.0Alaska North Slope (ANS)
$54.730.3738.3Brent (North
Sea)
$56.430.2439.6WTI
Price (2005)SulfurAPI GravityCrude
Source: http://www.tsocorp.com/refining101/index.swf
TopicsTopics
‣ Energy consumption & petroleum’s place
• Size of U.S. industry
• Major refiners
‣ Petroleum products
‣ Basic petroleum economics
• Trends for crude oil & gasoline prices
• When do refiners make money?
‣ Generalized Petroleum Refinery
Early HistoryEarly History
‣ First oil well of "Colonel" Edwin L. Drake
• August 1859, Oil Creek in northwestern Pennsylvania
• First refineries built up around Pennsylvania oil wells. Batch distillation to recover kerosene.� Kerosene viewed as a superior replacement to
whale oil for lamp oil.
‣ Standard Oil Trust• John D. Rockefeller acquired petroleum
interests during the late 1800s. Organized as the Standard Oil Trust in 1882.
• U.S. Supreme Court dissolved in 1911. 34 companies spun off.
‣ Change in product demand• In 1911, nation's kerosene output
eclipsed for the 1st time by a discarded byproduct - gasoline
Year Process name Purpose By-products, etc.
1862 Atmospheric distillation Produce kerosene Naphtha, tar, etc.
1870 Vacuum distillation Lubricants (original) Cracking feedstocks (1930's)
Asphalt, residual coker feedstocks
1913 Thermal cracking Increase gasoline Residual, bunker fuel
1916 Sweetening Reduce sulfur & odor Sulfur
1930 Thermal reforming Improve octane number Residual
1932 Hydrogenation Remove sulfur Sulfur
1932 Coking Produce gasoline basestocks Coke
1933 Solvent extraction Improve lubricant viscosity index Aromatics
1935 Solvent dewaxing Improve pour point Waxes
1935 Cat. polymerization Improve gasoline yield & octane number
Petrochemical feedstocks
1937 Catalytic cracking Higher octane gasoline Petrochemical feedstocks
1939 Visbreaking Reduce viscosity Increased distillate,tar
1940 Alkylation Increase gasoline octane & yield High-octane aviation gasoline
1940 Isomerization Produce alkylation feedstock Naphtha
1942 Fluid catalytic cracking Increase gasoline yield & octane Petrochemical feedstocks
1950 Deasphalting Increase cracking feedstock Asphalt
1952 Catalytic reforming Convert low-quality naphtha Aromatics
1954 Hydrodesulfurization Remove sulfur Sulfur
1956 Inhibitor sweetening Remove mercaptan Disulfides
1957 Catalytic isomerization Convert to molecules with high octane number
Alkylation feedstocks
1960 Hydrocracking Improve quality and reduce sulfur Alkylation feedstocks
1974 Catalytic dewaxing Improve pour point Wax
1975 Residual hydrocracking Increase gasoline yield from residual
Heavy residuals
Ref: http://www.osha.gov/dts/osta/otm/otm_iv/otm_iv_2.html
Description of Petroleum RefineryDescription of Petroleum Refinery
‣ Manages hydrocarbon molecules
‣ Organized & coordinated 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
Petroleum Refinery Schematic Petroleum Refinery Schematic
RefineryProcesses
Raw Materials
Products
Petroleum Refinery Schematic Petroleum Refinery Schematic
Frac
tio
nat
ion
Raw Materials
Products
Co
nve
rsio
n P
roce
sse
s
Re
fin
ery
Pro
cess
es
Ble
nd
ing
Separation based on volatility
Processing of gasoline blend
stocks
Upgrade gas oils & distillates
Upgrade residua
Remove undesirable components (e.g., sulfur)
Blending to meet final
product specs
SummarySummary
‣ Energy consumption & petroleum’s place
• The US uses more than the next 5 highest consuming nations combined
• Largest US refiners have resulted from mergers of other major companies
� Valero, ExxonMobil, ConocoPhillips, BP, Chevron, …
• Petroleum used primarily for light & heavy transportation fuel
� But there are over 2,000 possible products for a refinery
‣ Basic petroleum economics
• Crude oil & product prices have shown volatility
• Prices at historical highs
• Refiners make money based on the difference between product prices & feedstock costs
‣ Petroleum Refineries
• 1st refineries produced kerosene & discarded naphtha/gasoline
• Modern refineries & markets have developed over 100 years
• Societal influences: high octane gasoline production, clean fuels
• Generalized refinery: fractionation, conversion processes, & blending
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