Refinery problems in UK and elsewhere

[mooncliff]

I know refining is a difficult business and never very profitable, but is there an unusual amount of disruption?

http://www.dailymail.co.uk/news/arti...#ixzz1kZHDaUPO

Tesoro also wants to sell its refinery in Hawaii.

Are we looking at a series of refinery problems coming?

[Mega]

Re: Refinery problems in UK and elsewhere

Its saddnens me some what to report that the prices have NOT gone up!!!!
No panic & no hike in price as yet................BUGGER!

[don]

Re: Refinery problems in UK and elsewhere

Up to now the Western response has been primarily a military one. Is there another . . .

The Iranian oil embargo blowback
By Pepe Escobar

If the sorry parade of European poodles - or what analyst Chris Floyd delightfully dubbed Europuppies - had any understanding of Persian culture, they would have known that blowback for their declaration of economic war in the form of an Iranian oil embargo would be nothing short of heavy metal.

Better yet; death metal. The Majlis (Iranian parliament) will discuss this Sunday, in an open section, whether to cancel right away all oil exports to any European country that approved the embargo - according to Emad Hosseini, the rapporteur of the Majlis Energy Committee. And that comes with the requisite apocalyptic warning, relayed via the Fars news agency, courtesy of member of Parliament Nasser Soudani: "Europe will burn in the fire of Iran's oil wells."

Soudani expresses the views of the whole Tehran establishment when he says that "the structure of their [Europe's] refineries is compatible with Iran's oil", and so Europeans have no alternative as replacement; the embargo "will cause an increase in oil prices, and the Europeans will be compelled to buy oil at higher prices"; that is, Europe "will be compelled to buy Iran's oil indirectly and through intermediaries".

According to the EU sanctions package, all existing contracts will be respected only until July 1 - and no new contracts are allowed. Now imagine if this pre-emptive Iranian legislation is voted within the next few days. Crisis-hit Club Med countries such as Spain and especially Italy and Greece will be dealt a deathblow, having no time to find a possible alternative to Iran's light, high-quality crude.

Saudi Arabia - whatever the oily spin in Western corporate media - does not have the spare capacity; and on top of it, the absolute priority for the House of Saud is high oil prices, so it can bribe - apart from repressing - its own population into forgetting about noxious Arab Spring ideas.

So yes, already broken European economies would be forced to keep buying Iranian oil, but now from the winners of choice - middlemen vultures.

Not surprisingly, the losers lost in these Cold War tactics anachronistically applied to a global open market are the Europeans themselves. Greece - already facing the abyss - has been buying heavily discounted oil from Iran. The strong possibility remains of the oil embargo precipitating a Greek government bond default - and even a catastrophic cascade effect in the eurozone (Ireland, Portugal, Italy, Spain - and beyond).

The world needs a digital Herodotus to decode how these European poodles who claim to represent "civilization" were able, in a single stroke, to inflict simultaneous pain on Greece - the cradle of Western civilization itself - and Persia - one of the most sophisticated civilizations in history. In an astonishing historical replay of tragedy as farce, it's as if Greeks and Persians were bonded together at Thermopylae facing the onslaught of North Atlantic Treaty Organization armies.

Hit the Eurasian groove
Now compare it with the action all across Eurasia. Russian Foreign Minister Sergey Lavrov said, "Unilateral sanctions don't help matters". The Ministry of Foreign Affairs in Beijing, exercising immense tact, nevertheless was unmistakable; "To blindly pressure and impose sanctions on Iran are not constructive approaches."

Turkey's Foreign Minister Ahmet Davutoglu said, "We have very good relations with Iran, and we are putting much effort into renewing Iran's talks with the 5+1 [Iran Six - the United Nations Security Council permanent members plus Germany] mediators' group. Turkey will continue looking for a peaceful solution to the issue.”

BRICS member India - alongside Russia and China - also dismissed sanctions. India will keep buying Iranian oil and paying in rupees or gold. South Korea and Japan will inevitably extract exemptions from the Barack Obama administration.

All across Eurasia trade is fast moving away from the US dollar. The Asian Dollar Exclusion Zone, crucially, also means that Asia is slowly disengaging itself from Western banks.

The movement may be led by China - but it's irreversibly transnational. Once again, follow the money. BRICS members China and Brazil started bypassing the US dollar on trade in 2007. BRICS members Russia and China did the same in 2010. Japan and China - the top two Asian giants - did the same only last month.

Only last week, Saudi Arabia and China rolled out a project for a giant oil refinery in the Red Sea. And India more or less secretly is deciding to pay for Iranian oil in gold - even bypassing the current middleman, a Turkish bank.

Asia wants a new international system - and it's working for it. Inevitable long-term consequences; the US dollar - and, crucially, the petrodollar - slowly drifting into irrelevance. "Too Big to Fail" may turn out to be not a categorical imperative, but an epitaph.

http://www.atimes.com/atimes/Middle_East/NA28Ak05.html

[c1ue]

Re: Refinery problems in UK and elsewhere

If you want to get all conspiracy theory-ish, the largest weaknesses Iran and Venezuela have isn't oil, it is refinery capacity.

Venezuela can produce in the range of 3 million barrels per day, but can only refine about 1 million. Iran produces a bit over 4 million barrels a day, but has only 1.7 million barrels/day refining capacity, and imports 40% of its gasoline/refined products.

A refinery squeeze worldwide would affect both of these nations disproportionately.

It is also true that refineries are not very profitable in this era of high gasoline prices; between governments and declining 1st world gasoline usage, the economics prospects for refineries in the US and Europe is poor.

I was delayed in LAX last week for 3.5 hours; next to me in the bar was an engineer headed up to Chevron's refinery in the East Bay. All sorts of sob stories.

[GRG55]

Re: Refinery problems in UK and elsewhere

The high margin part of this cycle is over for the refiners. The problem with refining is that it always seems to get the "7 bad years", but usually only about "7 good months" to offset that. The collapse in crack spreads has been a bigger contributor to falling gasoline prices in the USA than lower crude prices.

Gasoline cracks continue to slide

•Average US gasoline cracks continued to crater last week, falling to near breakeven levels as all regions eased. Gulf Coast gasoline cracks (LLS) averaged -US11.31/bbl last week. Average US diesel cracks fell -9% as the Gulf Coast softened. In total, average US product cracks fell -32% to US$6.81/bbl last week.

•The WTI-Brent spread averaged -US$22.10/bbl last week, wider than the previous week’s average of -US$21.06/bbl.

•US gasoline and distillate exports. US gasoline exports registered 489kb/d in Sep-2012, while distillate exports were 1,013kb/d.

DOE inventory report

•The DOE inventory report revealed a large gasoline inventory build for the second straight week.

•US gasoline demand registered 8.49mb/d last week, dropping the 4-week moving average to 8.54mb/d. The 4-week average is -1.3% compared to 2011 and -4.8% below the 5-year average.

•Total US crude oil inventories rose +0.8mbbls (vs. -2.5 consensus) to 372.6mbbls. Crude stocks are +11.5% compared to last year’s level and +12.8% vs the 5-year average.

•Gasoline inventories rose +5.0mbbls (vs. +2.0 consensus) to 217.1mbbls and are -0.8% vs 2011 levels and +3.0% vs the 5-year average.

•Distillate inventories rose +3.0mbbls (vs. +1.1 consensus) to 118.1mbbls and are -16.6% vs 2011 levels and -19.3% vs the 5-year average.

•Refinery utilization fell to 90.4% (vs. 90.6% consensus) from 90.6% the previous week.

[shiny!]

Re: Refinery problems in UK and elsewhere

What do you mean by cracks? I've looked up the term in this context but can't find anything.

[GRG55]

Re: Refinery problems in UK and elsewhere

What do you mean by cracks? I've looked up the term in this context but can't find anything.

Sorry for the jargon shiny!. Sometimes we engineers get carried away :-)

"Cracking" in the petroleum refining industry refers to changing long chain hydrocarbons into lighter (shorter) hydrocarbons by breaking (cracking) some of the carbon-carbon bonds of the molecules. A petroleum hydrocarbon is exactly that...a molecule made up of the elements hydrogen and carbon. Each carbon has four bonds. So a single isolated carbon atom can have 4 hydrogen atoms bonded to it. This molecule is the lightest common hydrocarbon, is known as methane, is the primary component of natural gas and is usually depicted like this:



As the number of carbon atoms increases the molecule is heavier and the resulting hydrocarbon is liquid, instead of gas, at normal atmospheric conditions. Octane, which you will recognize as one of the best known components of gasoline blends, has eight carbon atoms (octa meaning eight in Latin), is a liquid hydrocarbon at normal conditions and is often depicted this way:




Crude oils contain a natural mix of different hydrocarbon molecules including some "heavy" long-chain hydrocarbon molecules with large numbers of carbon atoms. The main purpose of a petroleum refinery is to convert crude oil into a range of usable petroleum products. One of the important steps is to "crack" the larger, heavier molecules to make lighter, more useful (and valuable) hydrocarbon molecules which can be carefully blended together to make different grades of gasolines, diesel, aviation and jet fuel, and other products.

There are a number of different cracking technologies, but the most common are:

1. Thermal cracking, which most commonly uses high pressure steam;
2. Fluid catalytic cracking (jargon alert: this is often called a "cat cracker") which vaporizes the inlet and passes the resulting gases at high temperature over a catalyst that promotes the breakdown of the carbon-carbon bond; and
3. Hydrocracking, which adds hydrogen to make up for the shortfall of this element (when a carbon-carbon bond is broken it leaves space for two more carbon-hydrogen bonds, but that can only happen if there's some sexy looking, unattached hydrogen atoms in the vicinity)

The chemistry experts reading this will be screaming in agony because the chemistry is actually very complex and I have written a gross simplification above. But hopefully it has described what is going on in a way that is understandable to anyone who doesn't have a petroleum refining or chemistry background.

[jk]

Re: Refinery problems in UK and elsewhere

in the usage a couple of posts up, "crack" [as in "gasoline cracks continue to slide"] is being used as shorthand for crack spread.

Crack spread is a term used in the oil industry and futures trading for the differential between the price of crude oil and petroleum products extracted from it - that is, the profit margin that an oil refinery can expect to make by "cracking" crude oil (breaking its long-chain hydrocarbons into useful shorter-chain petroleum products).

[shiny!]

Re: Refinery problems in UK and elsewhere

Sorry for the jargon shiny!. Sometimes we engineers get carried away :-)

"Cracking" in the petroleum refining industry refers to changing long chain hydrocarbons into lighter (shorter) hydrocarbons by breaking (cracking) some of the carbon-carbon bonds of the molecules. A petroleum hydrocarbon is exactly that...a molecule made up of the elements hydrogen and carbon. Each carbon has four bonds. So a single isolated carbon atom can have 4 hydrogen atoms bonded to it. This molecule is the lightest common hydrocarbon, is known as methane, is the primary component of natural gas and is usually depicted like this:



As the number of carbon atoms increases the molecule is heavier and the resulting hydrocarbon is liquid, instead of gas, at normal atmospheric conditions. Octane, which you will recognize as one of the best known components of gasoline blends, has eight carbon atoms (octa meaning eight in Latin), is a liquid hydrocarbon at normal conditions and is often depicted this way:




Crude oils contain a natural mix of different hydrocarbon molecules including some "heavy" long-chain hydrocarbon molecules with large numbers of carbon atoms. The main purpose of a petroleum refinery is to convert crude oil into a range of usable petroleum products. One of the important steps is to "crack" the larger, heavier molecules to make lighter, more useful (and valuable) hydrocarbon molecules which can be carefully blended together to make different grades of gasolines, diesel, aviation and jet fuel, and other products.

There are a number of different cracking technologies, but the most common are:

1. Thermal cracking, which most commonly uses high pressure steam;
2. Fluid catalytic cracking (jargon alert: this is often called a "cat cracker") which vaporizes the inlet and passes the resulting gases at high temperature over a catalyst that promotes the breakdown of the carbon-carbon bond; and
3. Hydrocracking, which adds hydrogen to make up for the shortfall of this element (when a carbon-carbon bond is broken it leaves space for two more carbon-hydrogen bonds, but that can only happen if there's some sexy looking, unattached hydrogen atoms in the vicinity)

The chemistry experts reading this will be screaming in agony because the chemistry is actually very complex and I have written a gross simplification above. But hopefully it has described what is going on in a way that is understandable to anyone who doesn't have a petroleum refining or chemistry background.

Thank you, GRG55. This is really interesting!

[lektrode]

Re: Refinery problems in UK and elsewhere

....The collapse in crack spreads has been a bigger contributor to falling gasoline prices in the USA than lower crude prices.

Gasoline cracks continue to slide

....

•The DOE inventory report revealed a large gasoline inventory build for the second straight week.

•US gasoline demand registered 8.49mb/d last week, dropping the 4-week moving average to 8.54mb/d. The 4-week average is -1.3% compared to 2011 and -4.8% below the 5-year average.

•Total US crude oil inventories rose +0.8mbbls (vs. -2.5 consensus) to 372.6mbbls. Crude stocks are +11.5% compared to last year’s level and +12.8% vs the 5-year average.

•Gasoline inventories rose +5.0mbbls (vs. +2.0 consensus) to 217.1mbbls and are -0.8% vs 2011 levels and +3.0% vs the 5-year average.

•Distillate inventories rose +3.0mbbls (vs. +1.1 consensus) to 118.1mbbls and are -16.6% vs 2011 levels and -19.3% vs the 5-year average.

•Refinery utilization fell to 90.4% (vs. 90.6% consensus) from 90.6% the previous week.

considering how soft things have been genl'y - for most of the past 5years - is this more evidence of an approaching recession, grg/jk ?

or perhaps just 'deer in the headlights' syndrome exhibited by the US consumer due to the inability of the beltway to come up with a plan - real 'stimulus' aka JOBS vs just more free money to the banksters - to deal with the mess (they've created, that is, the failure of the political class)?

would appear that the string has been pushed into the corner, even in the oil biz?

[shiny!]

Re: Refinery problems in UK and elsewhere

in the usage a couple of posts up, "crack" [as in "gasoline cracks continue to slide"] is being used as shorthand for crack spread.

Crack spread is a term used in the oil industry and futures trading for the differential between the price of crude oil and petroleum products extracted from it - that is, the profit margin that an oil refinery can expect to make by "cracking" crude oil (breaking its long-chain hydrocarbons into useful shorter-chain petroleum products).

Ah, another explanation. Of course, when I hear the term crack spread I think of something else.

[Polish_Silver]

Re: Refinery problems in UK and elsewhere

Great drawings. And a great reminder of what an awesome fuel it is: high density liquid carbon and hydrogen---both very combustible elements. Without oil, it really would be some kind of dark ages!