U.S. refining crude slates continue towards heavier feeds, higher sulfur contents

Edward J. Swain
Consultant
Houston

A review of the historical data on crude gravity and sulfur content reveals a trend of poorer-quality crudes processed in U.S. refineries.

The information is based on data collected by the Energy Information Administration (EIA), which reports gravity and sulfur content of crudes processed within five Petroleum Administration for Defense Districts (PADDs). PADDs are mapped in Fig. 1 [136,709 bytes].

The past 10-year (1988-1997) gravity and sulfur contents of crudes processed by refineries in the five PADDs are presented in Table 1 [145,542 bytes]. For the past 10 years, the gravity of the U.S. crude slate has been getting heavier by 0.11° API/year. Likewise, the sulfur content of U.S. crudes has increased by 0.016 wt %/year.

This article updates an earlier one (OGJ, Jan. 13, 1997, p. 45) and includes data for 1997 refinery crude slates.

PADD 1

The gravity of PADD 1 crude supplies has been cyclical during the past 10 years. It was in a downward trend during 1989-1991 and in an upward trend during 1991-1997. The result of the two trends is a mild increase in gravity of 0.14° API/year during 1988-1997. More recently, the 1993-1997 trend is +0.32° API.

When averaged, the sulfur content in PADD 1 crudes has decreased about 0.022 wt %/year during the 1988-1997 period. This trend clearly indicates lower-sulfur crudes being processed in PADD 1 refineries. The 5-year, 1993-1997 trend is slightly lower, -0.013 wt %/year.

Refineries operating in PADD 1 have increased their use of imported crudes from over 80% in the early 1980s to nearly 98% in 1997.

Major sources of foreign crude in 1997 were Nigeria (286,000 b/cd), Angola (227,000 b/cd), Norway (189,000 b/cd), Venezuela (177,000 b/cd), Saudi Arabia (152,000 b/cd), and Gabon (106,000 b/cd).

The crudes processed by Sun Oil Co.'s two East Coast refineries indicate the trend of high-gravity, low-sulfur crudes charged to the East Coast refineries in 1997. Sun's two refineries processed about 32% of the total 1997 PADD 1 refinery crude runs (Table 2 [38,025 bytes]).

For PADD 1 in 1997:

• Crude runs were 1.48 million b/cd, an increase of 152,000 b/cd from 1996 crude runs of 1.3 million b/cd. The increase in crude runs was mainly a result of Tosco Corp. refinery (172,000 b/cd) at Marcus Hook, Pa., coming back on-line during 1997.
• Refineries operated at 89.9% of capacity.
• The composite crude slate had a gravity of 33.03° API and a sulfur content of 0.94 wt %.
• Foreign crude receipts were 1.45 million b/cd, an increase of 176,000 b/cd from 1996 receipts of 1.27 million b/cd.
• Consistent with the past 6 years, no Alaskan crude receipts were received.

PADD 2

The gravity in PADD 2 has dropped off moderately during the past 10 years (1988-1997)-about 0.14° API/year. The 5-year trend (1993-1997) reflects an increase of 0.12° API/year.

Sulfur content has moderately increased at a rate of 0.019 wt %/year during 1988-1997. In the past 5 years (1993-1997), sulfur has increased about 0.023 wt %/year.

Refineries in PADD 2 increased their use of foreign crudes from the low 20% in the mid-1980s to nearly 49% in 1997. They have maintained a mix of imported medium-gravity and medium-sulfur content crudes. In 1997, the major crudes imported into PADD 2 came from Canada (905,000 b/cd), Venezuela (158,000 b/cd), Saudi Arabia (115,000 b/cd), Nigeria (107,000 b/cd), Mexico (106,000 b/cd), and Colombia (66,000 b/cd).

Crude production within PADD 2 states has decreased about 24,000 b/cd per year during the past 5 years.

In 1994, existing crude pipelines that bring imported crudes from Gulf Coast receiving terminals were reaching maximum deliverable capacities. This shipping problem, however, was relieved, as additional foreign crudes became available to PADD 2 refineries:

• Mobil Oil Corp. shipped its first cargo of foreign crude through its newly reversed, 20-in., 200,000 b/cd crude pipeline from Sun Co. Marine terminal in Nederland, Tex., to Patoka, Ill., in mid-May 1995.
• Atlantic Richfield Co. (ARCO) and Phillips Petroleum Co., in a 50-50 venture, expanded a pipeline system to transport crudes from ports on the Gulf Coast to the Midcontinent region. ARCO contributed its 20-in., 550-mile pipeline system running from Texas City, Tex., to Cushing, Okla. The pipeline system has a capacity of 160,000 b/cd.

Phillips's contribution to the venture is its 30-in., 500-mile natural gas pipeline that runs from Cushing, Okla., to Freeport, Tex. The gas line was converted to carry 270,000 b/cd of crudes. The total system began operating in early 1996.

For PADD 2 refineries in 1997:

• Crude runs were 3.55 million b/cd, an increase of 96,000 b/cd from 1996 crude runs of 3.25 million b/cd.
• Refineries operated at 98.9% of capacity.
• The composite crude slate had a gravity of 33.31° API and a sulfur content of 1.23 wt %.
• Foreign crude receipts were 1.63 million b/cd, an increase of 228,000 b/cd from 1996 receipts of 1.41 million b/cd.
• Alaskan crude receipts were 9,000 b/cd, about a 35.7% decrease from 1996 receipts.

PADD 3

The quality of PADD 3 import crudes has dropped off quickly during the past 10 years. Gravity has decreased at a rate of about 0.23° API/year, and sulfur content has increased moderately at 0.021 wt %/year.

A 5-year trend shows even a faster rate of decreasing crude quality than the 10-year period. During 1993-1997, the gravity decreased about 0.25° API/year, and the sulfur content increased about 0.030 wt %/year.

PADD 3 refineries have increased the use of foreign crudes from the upper 20% in the mid-1980s to over 67% in 1997.

Although PADD 3 has reversed its low crude-production rate of 3.12 million b/cd in 1995 to a rate of 3.28 million b/cd in 1997, the region needs to import more foreign crudes to meet the demands of increased crude runs by district refineries.

Five recent agreements between the U.S. and other countries require refinery modifications to process crudes from Venezuela and Mexico:

• Clark USA Inc. and Pemex (Petr?leos Mexicanos) agreed to upgrade Clark's Port Arthur, Tex., refinery to process Mayan crude.
• Ultramar Diamond Shamrock Corp.'s Three River, Tex., refinery is being modified to handle Mexican crude.
• Lyondell-Citgo Refining Co. Inc.'s refinery in Houston is processing greater quantities of Venezuelan crudes.
• Mobil's Beaumont, Tex., refinery is being modified to process Venezuelan crudes.
• Phillips Petroleum Co.'s refinery at Sweeny, Tex., is being modified to process Venezuelan crude.

Major crude sources from foreign countries include Mexico (1.22 million b/cd), Venezuela (1.04 million b/cd), Saudi Arabia (1.01 million b/cd), Nigeria (297,000 b/cd), Kuwait (181,000 b/cd), and Angola (145,000 b/cd).

These crudes are of medium/heavy gravity and medium-sulfur content. Therefore, the trend in heavier gravity and moderate sulfur content crudes being processed by refineries in PADD 3 are expected to continue.

For PADD 3 refineries in 1997:

• Crude runs were 6.85 million b/cd, an increase of 203,000 b/cd from 1996 crude runs of 6.64 million b/cd.
• Refineries operated at 96.6% of capacity.
• The composite crude slate had a gravity of 31.32° API and a sulfur content of 1.33 wt %.
• Foreign crude receipts were 4.61 million b/cd, an increase of 278,000 b/cd from the 1996 receipts of 4.33 million b/cd.
• Alaskan crude receipts were 1,000 b/cd during 1997, about a 90.0% decrease from 1996 receipts.

PADD 4

In PADD 4, the crude quality has dropped rapidly during the past 10 years. Gravity has decreased about 0.30° API/year, and sulfur content has increased about 0.070 wt %/year. In the past 5 years, the gravity has decreased by about 0.35° API/year and the sulfur has increased about 0.049 wt %/year.

High-quality crude production within PADD 4 has decreased by about 20,000 b/cd during the past 5 years. Canadian crudes are replacing high quality, domestic crudes. Therefore, further drops in °API values and increasing sulfur contents of crudes processed by refineries in PADD 4 are expected.

Refineries operating in PADD 4 are well isolated from foreign crudes other than Canadian crudes. The refineries process local crudes from Colorado, Montana, Utah, and Wyoming. Canadian crudes processed by the Rocky Mountain refineries have increased to nearly 26% in 1997 from 10% in the mid-1980s.

Additional Canadian crudes could move into the Rocky Mountain refineries by way of a proposed 784-mile crude pipeline from Hardisty, Alta., to Opal (Casper), Wyo., by TransCanada Pipelines Ltd. and Alberta Energy Co. Ltd. The 170,000 b/cd line targets markets in Colorado, Montana, Utah, and Wyoming. The line was scheduled for completion in November 1996 but has been delayed.

For PADD 4 refineries in 1997:

• Crude runs were 479,000 b/cd, an increase of 10,000 b/cd from 1996 crude runs of 469,000 b/cd.
• Refineries operated at 92.9% of capacity.
• The composite crude slate had a gravity of 33.10° API and a sulfur content of 1.38 wt %.
• Foreign crude in 1997 was imported from Canada at a rate of 124,000 b/cd, a decrease of 1,000 b/cd from the 1996 receipts of 125,000 b/cd.
• Consistent with the past 6 years, no Alaskan crude was received during 1997.

PADD 5

Refineries operating in PADD 5 have slightly increased their use of foreign crude from about 14% in 1980 to over 16% in 1997.

The crude slate of PADD 5 refineries had an average gravity of about 25.49° API during the past 10 years. The annual values varied from a high of 26.08° API (1997) to a low of 24.95° API (1992). During 1988-1997, the gravity increased by 0.03° API/year.

The crude sulfur content moderately increased by 0.011 wt %/year.

The crude slate over the past 5-year period (1993-1997) had a moderate 0.18° API/year increase in gravity and a 0.014 wt %/year increase in sulfur content.

Although crude production within PADD 5 states has dropped about 89,000 b/cd per year, there is a limited need to import more foreign crudes to meet refinery crude runs. The drop in crude production is mainly from Alaskan North Slope (ANS) oil fields, 82,000 b/cd. Therefore, less Alaskan crudes are shipped to PADDs 2 and 3.

The six major imported crudes into PADD 5 in 1997 were from Canada (104,000 b/cd), Indonesia (48,000 b/cd), Iraq (35,000 b/cd), Australia (31,000 b/cd), Argentina (26,000 b/cd), and Ecuador (26,000 b/cd).

Two refineries in Hawaii process crude from the Pacific Rim and Middle East regions, plus some ANS. The refineries in the Pacific Northwest process ANS and Canadian crudes. The major crudes processed by California refineries are from California and the ANS. The California crudes are of rather poor quality (25.0-26.0° API and 1.05-1.10 wt % sulfur).

For PADD 5 refineries in 1997:

• Crude runs were 2.51 million b/cd, an increase of 6,000 b/cd from 1996 crude runs of 2.50 million b/cd.
• Refineries operated at 90.5% of capacity.
• The composite crude slate had a gravity of 26.08° API and a sulfur content of 1.24 wt %.
• Foreign crude receipts were 409,000 b/cd, an increase of 36,000 b/cd from the 1996 receipts of 373,000 b/cd.
• Alaskan crude receipts were 1.22 million b/cd during 1997, about a 9.3% decrease from 1996 receipts.

Total U.S.

The gravity of crudes processed in U.S. refineries has decreased about 0.11° API/year during the past 10 years ( Fig. 2 [34,771 bytes]). The sulfur content has increased about 0.016 wt %/year over the same time period ( Fig. 3 [30,096 bytes]).

According to the past 5-year data (1993-1997), the gravity has gotten heavier by 0.07° API/year, and the sulfur content has increased by 0.021 wt %/year.

In 1993, imported crudes averaged about 6.79 million b/cd. In 1997, imported crudes averaged about 8.23 million b/cd. As domestic crude production falls, increased amounts of imported crudes are required to meet U.S. refinery demands.

A distribution of the volumes of crude based on gravity during the past 10 years is shown in Table 3 [81,454 bytes]. In the next 5-10 years, the gravity of imported crudes to the U.S. is expected to be heavier for several reasons:

• The worldwide increase in crude demands (mainly in the Pacific Rim countries)
• Price spreads in crude grade based on gravity
• Political stability of crude-producing country/region
• Decreasing production of high-gravity, low-sulfur crudes.

The top six sources of imported crudes during 1997 into the U.S. were Venezuela (1.39 million b/cd), Mexico (1.36 million b/cd), Saudi Arabia (1.30 million b/cd), Canada (1.20 million b/cd), Nigeria (689,000 b/cd), and Angola (425,000 b/cd). These six countries supplied 77.3% of the imported crudes during 1997.

The U.S. imported crude from 31 countries during 1997. A 5-year history of major foreign crudes imported into the U.S. is presented in Table 4 [65,363 bytes].

Import trend

As U.S. crude production decreases, a greater quantity of crude will be imported to fill the needs of U.S. refineries.

During 1981-1992, there was some movement to import heavier crudes as a result of major price spreads in crude. In the 1993-1997 period, however, the ratio of heavy-to-light crudes has stabilized at about 1:1.43 (Table 5 [34,602 bytes]).

The price spread between light-gravity crudes increased moderately in 1997 on imported U.S. crudes.

In the coming years, imported crudes to the U.S. may continue to be heavier, as U.S. refineries form joint ventures with producers from Mexico, Saudi Arabia, and Venezuela. Refiners in PADDs 2, 3, and 4 have major projects to modify their heavy-end processing units to accept these heavier crudes to produce light, low-sulfur transportation fuels.

Light crude landing costs

Landing costs of imported crudes into the U.S. in 1988-1997, grouped by gravity, are presented in Table 6 [61,844 bytes].

To determine fluctuations in price spreads, the author performed calculations using the landing costs of the 30.1-35.0° API subgroup as the base price. This group was chosen because the average gravity of crude runs to U.S. refineries was 31.09° API in 1997 and 31.98° API in 1988. The gravity has declined at a rate of 0.11° API/year between 1988 and 1997.

Light crude prices in the 40.1-45.0° API group and the 35.1-40.0° API group have had the base price subtracted from them. The delta values are illustrated in Fig. 4 [38,302 bytes].

Fig. 4 indicates that there is hardly any premium of the 40.1-45.0° API subgroup over the 35.1-40.0° API subgroup in the 1988-1992 period. The delta price for the 35.1-40.0° API subgroup and the 40.1-45.0° API subgroup cycled around $1.37/bbl and $1.83/bbl, respectively. Therefore, the premium price spread was only about $0.46/bbl.

Delta prices decreased slightly in the 1993-1997 period. The delta price for the 35.1-40.0° API subgroup and the 40.1-45.0° API subgroup cycled around $1.27 and $1.59/bbl, respectively. The premium price spread decreased to $0.32/bbl.

Heavy crude landing costs

To calculate price differentials for the heavier crude classifications, crudes prices in the 25.1-30.0° API group and the 20.1-25.0° API group were subtracted from the base price. The delta values are illustrated in Fig. 5 [35,177 bytes].

Price deltas were at their maximum values in 1991. The delta price for the 25.1-30.0° API and the 20.1-25.0° API subgroups cycled around $0.65/bbl and $3.10/bbl, respectively, during the 1988-1992 period. The premium price spread was about $3.05/bbl and was the result of a collapse of differentials between the base and the 25.1-30.0° API during the 1987-1990 period. In fact, the delta prices were negative (-$0.41/bbl) in 1990, probably as a result of the Iraq-Kuwait situation.

The deltas for the 25.1-30.0° API and the 20.1-25.0° API subgroups improved in the 1993-1997 period. They have cycled around $0.27 and $2.71/bbl, respectively.

Therefore, the premium price spread between these two subgroups was about $2.44/bbl. The delta price for 25.1-30.0° API curves became negative (-$0.11/bbl) in 1997. This delta was probably a result of the general drop in prices for all grades in conjunction with the sporadic entry of Iraq's crudes in the world markets, which can upset normal pricing trades.

The Author