The Oil Drum: Australia/New Zealand

There have been several refining questions lately that were topical to this essay, originally posted in January 2007. Here I have updated it to reflect more recent prices.

When a refinery purchases crude oil, the key piece of information they need to know about that crude, besides price, is what the crude oil assay looks like. There has been a lot of discussion here at various times about “light sweet”, or “heavy sour”, and how these qualifiers affect the ability of a refiner to turn these crudes into products. So, I thought it would be good to devote an essay to this subject, and discuss how different types of crude can affect a refiner’s bottom line.

Let's compare light sweet oil to heavy sour oil by looking at a pair of assays:

Table 1. Comparison Between Assays of Light and Heavy Crudes

Just what is summer gasoline? Twice a year, in the fall and in the spring, you hear about the seasonal gasoline transition. However, most people probably don’t understand what this actually means. AAA published a Top 10 list explaining the seasonal rise in gasoline prices, and summer gasoline checked in at #7:

7. The summer blend switchover. This transition from winter-blend to summer-blend fuel, a concoction that causes less smog, occurs every spring. It causes a dip in gasoline supplies as refineries in the U.S. shut down temporarily to retool their production facilities.

That's only partially correct, and is probably the extent of most people's understanding of this transition. But given that I am very keen that people should understand the energy industry, it is worth a review, and a layman's explanation. I explained the details behind this transition in Refining 101: Winter Gasoline. But let’s review some concepts.

There was a question floating around the TOD editors forum today about reports of petrol shortages in Australia.

This was news to me, so I thought I'd see if there was any truth to the rumour.

After doing some digging, it seems that Shell's Sydney refinery is having technical problems that have caused the flow of premium unleaded to cease for the time being (no skin off my nose - but I had a look at the local servo and it appears that there is no premium to be had, at any price).

I was also interested to see that both Shell and Caltex have other refineries reporting technical problems or scheduled maintenance this month, which means that a lot of the local refined products supply is coming from Singapore instead, causing a jump in Asian prices (not helped by problems in China and Vietnam).

ABC - Shell shortage hits Sydney servos

Daily Telegraph - Holiday petrol runs dry

Scroll down for the 5:00p and 11:50p EDT updates.

Hurricane Dean became a Category 5 storm last night with winds reaching 165 mph and reaching a low pressure of 909 mb (as of 2:15a EDT; Katrina was 920 mb and Camille 909 mb). Landfall occurred early yesterday morning with a second landfall occurring some time today. This is an historic hurricane by any standard.

Why this matters: If there were Cat2 winds in that area, we could have been talking about around 2.5 million barrels per day of Mexico's supply capacity being shut in for a while, and some of that shut in for an extended amount of time. Around 1.5 mbpd of that capacity is exported to the US (of the 20.5 mbpd the US uses, and the 85mbpd the world uses, each day). There are also some questions about the resilience of refineries and flow lines in the area of the second landfall.

Update (Khebab, 11:50 EDT):

HURRICANE DEAN ADVISORY NUMBER 35A
...DEAN IS MOVING BETWEEN THE WEST AND WEST-NORTHWEST NEAR 20 MPH...32KM/HR...AND THIS GENERAL MOTION IS EXPECTED DURING THE NEXT 24 HOURS. ON THE FORECAST TRACK...DEAN IS EXPECTED TO BE VERY NEAR THE COAST OF CENTRAL MEXICO DURING THE DAY WEDNESDAY. MAXIMUM SUSTAINED WINDS REMAIN NEAR 80 MPH...130 KM/HR...WITH HIGHER GUSTS. DEAN IS A CATEGORY ONE HURRICANE ON THE SAFFIR-SIMPSON SCALE. AN AIR FORCE PLANE IS CURRENTLY APPROACHING DEAN. SOME RE-STRENGTHENING IS FORECAST DURING THE NEXT 24 HOURS.

 HURRICANE FORCE WINDS EXTEND OUTWARD UP TO 35 MILES...55 KM...FROM THE CENTER...AND TROPICAL STORM FORCE WINDS EXTEND OUTWARD UP TO 140 MILES...220 KM. ESTIMATED MINIMUM CENTRAL PRESSURE IS 970 MB...

Cantarell and KMZ oil complex, 50-knots wind speed probabilities (NHC, forecast #35). Click to Enlarge.

Refinery position, 50-knots wind speed probabilities (NHC, forecast #35). Click to Enlarge.

More under the fold.

UPDATE, NEW POST UP TOP AS OF 1:20 AM EDT, 8/21

We know that many of the models have Dean going into the Bay of Campeche. But what does that mean for supply and production?

Well, if the current forecast holds we could be talking about 2.5 million barrels per day of supply capacity being shut in for a while, and some of that for an extended amount of time. Can that matter when the US consumes about 21 million barrels per day (and the world consumes 85 mbpd)? Yes.

Especially when there isn't "slack" supply to be brought to market. That is what "peak oil" is about.

The markets aren't reacting yet. Do they know something we don't know? Maybe.

But what do we actually know about Mexico and its supply and infrastructure?

Under the fold (click "there's more" below), I am going to try to bring together some of our information we have gleaned to this point. I also encourage you to deliver news tips, forecasts, insights, and other links in the comment thread below.

UPDATE: PEMEX is shutting down ~140 rigs and moving 13,000+ workers on land. Cantarell + Ku-Maloob-Zaap account for 66% of the total oil production of PEMEX in June 2007. Cantarell alone is 47%.

Folks, thanks for your great efforts in this thread. There's a lot of cool stuff down there! Now, if we just knew where Dean was going...so, continue linking to maps (esp. of Cantarell/Jack/Yucatan, but Texas and LA too), oil maps, NG maps, LNG stations, refinery maps, pipeline maps, shipping lanes, rig maps, news stories, weather, track predictions, strategic resources, and all that other stuff in this comment thread. Then I'll go through and start aggregating those for what looks more and more like it will be a very busy week next week. Ideas or assistance are always welcome. (New post on Dean as of 20:50 EDT 8/19 up top.)

This is a guest post by Smokey. Smokey has a background in sustainability in transportation, and has conducted research on responding to fuel supply disruptions.

To what degree is the decline in quality crude affecting domestic refinery utilization rates and therefore gasoline stocks?

In recent years some analysis has suggested that light sweet crude oil may have peaked, with the world left to increasingly rely on lower quality crudes. See for example this story on The Oil Drum and this story on Energy Bulletin. Although the data on global peaking of light sweet crude may not yet be conclusive, data on the production of many regions that produce primarily light sweet crudes conclusive show that many of these regions are past peak.

Introduction

In Part I, I discussed the short term factors that have resulted in the recent, rapid increase in the price of gasoline. But there are a number of underlying, long-term issues that have been major contributors. I will attempt to address them and answer a number of related questions, such as: Why have no new refineries been built in the past 30 years? Are U.S. refineries breaking down more than normal? Are oil companies purposely withholding supplies to keep prices high? Have environmental regulations played a role? Does the use of ethanol influence gasoline demand growth? The answers to some of these questions may surprise you.

On May 16th, I participated in another conference call with the American Petroleum Institute. The subject was gas prices. Since I am probably not the best person to challenge the API on gas prices, I put out an invitation at The Oil Drum for others to join the call. (The reason I am not the best person to challenge them is (1) I understand why gas prices are rising; (2) I work in the industry; and (3) I think prices should be even higher to spur conservation efforts). So, joining me on the call were 2 of my colleagues from TOD - Alan Drake and Chris Miller (Dryki). I will pull out some excerpts of our questions, but you can read the entire transcript here. I am told that they had some recording difficulties, so there will be no audio posted.

Clean up your own backyard, Stelmach tells Gore

Gore was in Calgary speaking at a sold-out Jack Singer Concert Hall about his Academy Award-winning documentary, An Inconvenient Truth, which argues global warming, spurred by the use of carbon-based fuels such as oil and coal, is the biggest threat facing the world.

He has targeted the oilsands, suggesting far too much natural gas is burned processing northern Alberta's bitumen.

But Stelmach, who hasn't seen the documentary, said Monday in Calgary the province is merely feeding Americans' insatiable demand for energy, so perhaps Gore should look closer to home.