product pricing basis is December 2013. FOB points vary, affecting transportation
costs. The economics are based on US pricing.
In the upper set of numbers, we look at how the yields and product values change
with increasing refinery conversion using a single marker crude: West Texas
Intermediate (WTI). You can see that the potential margin increases significantly
with increasing conversion. These margins do not include operating costs or
transportation, which reduce the actual realized margin for each type; but the
trend toward more profitability for a more complex facility still remains, even
after factoring in the costs.
The lower set of numbers in the table illustrates how improving crude
selection for each type of refinery can help optimize the margin. For a topping
facility, selection of a sweeter, lighter crude means more product with lower
sulfur per barrel of crude. Value of the products is a little better. You pay for
this with a higher crude cost. WTI is a pretty good fit for the hydroskimming
and cracking refineries. For the full-conversion refinery, however, we would
pick a heavy, sour crude, like Western Canadian Select, which has a large price
discount. Compared to running WTI, the potential margin is more than twice as
large by picking a crude to fit the facility capabilities. Of course, expect higher
processing costs.
Key Points in Refinery Configuration
Refineries are generally classified into four categories based on their conversion
capability: topping (no conversion), hydroskimming (product treatment), cracking
(heavier oil conversion), and full conversion (maximum conversion).
As the conversion capability is increased from none to full conversion, the
potential product value from a refinery increases and the crude flexibility
expands. The net result is that the potential margin increases with conversion
capability. The selection of configuration for a specific refinery has to consider
the available market and crudes. There is an economic optimization among the
factors to select a refinery configuration that has the best margin potential with
appropriate crude flexibility. This evaluation must be made for each facility.
Expect the economics to change as a region develops and global economic
forces change.
Refinery Configuration References
1. Article: The sweet and sour economics of refining, (2013), http://www.
investingdaily.com/16229/the-sweet-and-sour-economics-of-refining/, accessed
February 2014.
2. Hauge, K. (Statoil, 2010), Article: Refining ABC, http://www.statoil.com/en/
investorcentre/presentations/, accessed February 2014.
3. MathPro (2011), Article: An introduction to petroleum refining and the production of ultralow sulfur gasoline and diesel fuel, International Council on Clean
Transportation, October 2011, accessed 2014.
92
D.S.J. Jones and S.A. Treese
costs. The economics are based on US pricing.
In the upper set of numbers, we look at how the yields and product values change
with increasing refinery conversion using a single marker crude: West Texas
Intermediate (WTI). You can see that the potential margin increases significantly
with increasing conversion. These margins do not include operating costs or
transportation, which reduce the actual realized margin for each type; but the
trend toward more profitability for a more complex facility still remains, even
after factoring in the costs.
The lower set of numbers in the table illustrates how improving crude
selection for each type of refinery can help optimize the margin. For a topping
facility, selection of a sweeter, lighter crude means more product with lower
sulfur per barrel of crude. Value of the products is a little better. You pay for
this with a higher crude cost. WTI is a pretty good fit for the hydroskimming
and cracking refineries. For the full-conversion refinery, however, we would
pick a heavy, sour crude, like Western Canadian Select, which has a large price
discount. Compared to running WTI, the potential margin is more than twice as
large by picking a crude to fit the facility capabilities. Of course, expect higher
processing costs.
Key Points in Refinery Configuration
Refineries are generally classified into four categories based on their conversion
capability: topping (no conversion), hydroskimming (product treatment), cracking
(heavier oil conversion), and full conversion (maximum conversion).
As the conversion capability is increased from none to full conversion, the
potential product value from a refinery increases and the crude flexibility
expands. The net result is that the potential margin increases with conversion
capability. The selection of configuration for a specific refinery has to consider
the available market and crudes. There is an economic optimization among the
factors to select a refinery configuration that has the best margin potential with
appropriate crude flexibility. This evaluation must be made for each facility.
Expect the economics to change as a region develops and global economic
forces change.
Refinery Configuration References
1. Article: The sweet and sour economics of refining, (2013), http://www.
investingdaily.com/16229/the-sweet-and-sour-economics-of-refining/, accessed
February 2014.
2. Hauge, K. (Statoil, 2010), Article: Refining ABC, http://www.statoil.com/en/
investorcentre/presentations/, accessed February 2014.
3. MathPro (2011), Article: An introduction to petroleum refining and the production of ultralow sulfur gasoline and diesel fuel, International Council on Clean
Transportation, October 2011, accessed 2014.
92
D.S.J. Jones and S.A. Treese