Gravity, sulfur content of U.S. crude slate holding steady

Edward J. Swain
Consultant
Houston

The author performed a regression analysis on data published by the Energy Information Administration, Washington, D.C. The results indicate that for the period from 1991 to 1995, the API gravity of U.S. crude runs has decreased an average of only 0.06°/year, and sulfur content has increased a mere 0.002 wt %/year. Data for the 1986-1995 period show larger changes.

This article updates an earlier article by including data for 1994 and 1995 crude runs (OGJ, Jan. 9, 1995, p. 37).

Data collection

The U.S. Department of Energy (DOE) tracks the U.S. refining industry by collecting pertinent operating data. DOE groups these data by Petroleum Administration for Defense District, or PADD (Fig. 1 [20881 bytes]).

Among the data DOE collects are monthly and annual composite values for the API gravity and sulfur content of crude oils processed in U.S. refineries. DOE also collects information on the countries of origin and landing costs of the crudes processed.

Table 1 [41153 bytes] shows annual average values for the gravity and sulfur content of crude runs in the five PADDs, and for the U.S. as a whole. The following sections summarize characteristics of the crude slates and refinery operations for each PADD.

PADD 1

In 1995, the crude slate of PADD 1 refineries consisted of nearly 95% foreign crudes, compared to just over 80% in the early 1980s.

PADD 1 refiners most commonly used Nigerian crude (295,000 b/cd). Other major sources were: Saudi Arabia (238,000 b/cd); Angola (168,000 b/cd); Venezuela (157,000 b/cd); Norway (153,000 b/cd); and the U.K. (96,000 b/cd).

The API gravity of the crude used in PADD 1 has been fluctuating for the past 10 years. The average gravity decreased between 1986 and 1990, then increased between 1991 and 1995.

In the regression analysis, the two trends essentially canceled each other out. PADD 1 has shown no change in API gravity over the 10-year period from 1986 to 1995, remaining at an average value of 31.44° API.

The sulfur content of the PADD 1 crude slate has cycled also, but for the 10-year period it has decreased an average 0.006 wt %/year. For the 5-year period from 1991 to 1995, sulfur has decreased 0.042 wt %/year, and gravity has increased 0.19°/year.

The more prominent 5-year trends are the result of increased use of high-gravity, low-sulfur crudes from African countries-mainly Nigeria and Angola-and from the North Sea.

Recent changes in the ownership of some important PADD 1 refineries could affect both short and long-term trends in the quality of the crudes processed in the region.

Tosco Corp. purchased Exxon Co. U.S.A.'s refinery in Bayway, N.J., in 1993. And in 1994, Sun Co. Inc. purchased Chevron U.S.A. Inc.'s Philadelphia refinery. More recently, Tosco Corp. purchased BP Oil Corp.'s refinery at Marcus Hook, Pa.

For PADD 1 refineries in 1995:

Total U.S.

The 10-year U.S. regression trend reveals a moderate decline in the gravity of crudes processed by U.S. refiners-0.12°/year. Sulfur content has increased 0.021 wt %/year, also a moderate change.

Figs. 2 [23057 bytes] and 3 [19289 bytes] plot the 10-year trends in, respectively, API gravity and sulfur content of crude runs have declined relative to earlier periods.

Imports have increased markedly during the 5-year period. In 1991, crude imports totaled 5.782 million b/cd, compared to 1995 imports of 7.230 million b/cd. As U.S. production continues to fall, this trend will continue.

It is expected that the pattern of crude imports will remain steady in the near term. But in the next 5-10 years the gravity of the crudes imported may decrease.

Reasons for this declining quality include: an increase in global crude demand, price spreads between heavy and light grades, political climates in producing countries, and decreasing production of light, sweet crudes.

Major sources of imports to U.S. refineries in 1995 were: Saudi Arabia (1.26 million b/cd); Venezuela (1.151 million b/cd); Canada (1.04 million b/cd); Mexico (1.027 million b/cd); Nigeria (621,000 b/cd); and Angola (360,000 b/cd). A 5-year history of crude imports from these countries is shown in Table 2 [10003 bytes].

These six countries supplied 75.5% of the crudes imported to U.S. refineries during 1995. The remaining 24.5% of imports were supplied by 28 countries.

Colombia may become a leading source of crude to U.S. refineries in the last half of the decade. Historically, Colombian crudes have been imported mostly by refineries in PADD 3, but some of the new production from the Cusiana and Cupiagua fields is being shipped to PADDs 1 and 2 (OGJ, Nov. 20, 1995, p. 27).

Cusiana is similar to West Texas Intermediate and Bonny Light, in that it has low levels of sulfur, nitrogen, metals, and acidity (OGJ, Dec. 11, 1995, p. 71).

As big a program as the Cusiana project is, it is not without potential roadblocks. Rebel forces routinely sabotage oil facilities in the Colombian hinterland where Cusiana and Cupiagua are located.

Imports

Between 1991 and 1995, the heavy-to-light ratio of crudes imported into the U.S. has leveled off at about 1:1.40. Fig. 4 [22939 bytes] shows imports divided into two gravity classifications: 30.0° API and 30° API.

Table 3 [8348 bytes] lists total annual crude imports for 1986 through 1995, and the quantities of heavy and light crudes that make up the total. Table 4 [39713 bytes] breaks down the gravity categories further into 5° divisions.

Because it appears that imports may become heavier, refiners in PADDs 2, 3, and 4 have been performing major upgrades to modify their heavy-ends processing schemes to accept these heavier crudes.

The DOE also tracks the landing costs of imported crudes. Landing costs, grouped by API subgroup, are shown in Table 5 [40021 bytes].

To determine fluctuations in price spreads, the author performed some calculations using the landing costs of the 30.1-35.0° API subgroup as the base price. This subgroup was chosen because the average gravity of crude runs to U.S. refineries was 31.30° during 1995.

To determine the price differentials between the light API subgroups and the base group, the base price was subtracted from the average landing cost for that subgroup. Fig. 5 [21895 bytes] shows the differentials for light crudes.

The differentials indicate that there was hardly any premium for crudes in the 40.1-45.0° subgroup over crudes in the 35.1-40.0° subgroup between 1986 and 1990. The differentials for the two groups cycled around, respectively, $1.00/bbl and $1.36/bbl. The premium spread was therefore only about $0.36/bbl.

For light crudes, the deltas improved somewhat during the 1991-1995 period. The lightest group was at an average premium of $1.74/bbl compared to the base group, and the second lightest group was at a premium of about $1.50/bbl. The differential between these two light groups, however, declined to only $0.24/bbl.

To calculate the price differentials for the two heavier classifications, the average price for a subgroup was subtracted from the base price. Fig. 6 [22671 bytes] shows a plot of these differentials between 1986 and 1995.

Price deltas were at a maximum in 1991. Between 1986 and 1990, the differentials for the 25.1-30.0° and the 20.1-25.0° subgroups cycled around, respectively, $0.39/bbl and $2.34/bbl.

The premium spread between these two groups was $1.95/bbl and was the result of a collapse of the differentials between the base and 25.1-30.0° groups during 1986-1990. In fact, the deltas were $-0.41/bbl in 1990, probably as a result of developments in the Middle East.

The deltas for the two heavier groups improved in the 1991-1995 period. They have cycled around $0.80/bbl and $3.25/bbl.

The changes in these differentials will be interesting to watch in the coming years, especially given the recent joint ventures which tie foreign crude supply to U.S. refining capacity.

The Author