Allowing US exports of crude oil might seem to defy logic. Oil & Gas Journal expects the country to meet 13.4 million b/d of the 18.8 million b/d of oil it will need this year through field production of crude oil, lease condensate, and natural gas plant liquids; renewable fuels; and processing gains. It will import the rest, all net crude oil. So why not retain the effective ban on crude exports?
The answer to that question relates to logistical and processing issues in specific regions, especially the Gulf Coast. Thanks to rapid increases in supplies of light oil from low-permeability formations in the US interior and of blended bitumen and synthetic crude from Canada, flows have reversed in much of the core pipeline system. Now, land transport—by pipelines supplemented by trains, trucks, and barges—moves crude oil toward rather than away from the Gulf Coast, where tanker-borne imports of crude, especially light grades, are shrinking. At the world's largest concentration of refining capacity, a surplus of feedstock looms.
Heavy vs. light
Because US demand skews strongly toward light products, the logical strategy might seem to be for refiners to run newly abundant, domestically produced light, sweet crude and reject the heavy, sour material arriving in growing amounts from more distant fields in Canada. Refining, alas, is not that simple. Most Gulf Coast refineries were designed for medium and heavy feedstocks. They have coking and cracking units to convert low-value products of distillation into lighter, more valuable fuels.
Refineries so designed can't swing easily from heavy to light feeds. Difficulties vary from plant to plant. Distillation towers of refineries built for heavy crude often have insufficient capacity for handling all the light fractions yielded by lighter feeds. Some of these refineries have limited ability to cool and condense light ends and to strip liquids from saturated gas. Blending light and heavy crudes can ease these problems in some refineries.
Greater problems for high-conversion refineries relate to the feedstock needs of upgrading equipment such as coking units, fluid catalytic crackers, and hydrocrackers. Most cokers process vacuum resid, and most cat crackers run vacuum gas oil. Hydrocrackers handle a range of feeds, often from other upgrading units. In a refinery substituting light for heavy crude feeds, distillation yields of heavy intermediates can fall below levels needed to keep cokers and crackers busy. Often, cutting operating rates of the upgrading units isn't an option.
In a December report, Facts Global Energy (FGE) explained: "Crackers are now critical to product quality and the total heat balance of the refinery. A light crude may give a good deal of naphtha, some of which can be reformed for gasoline blending. But without FCC naphtha there will not be enough octane in the blending pool. Similarly, hydrocrackers make important quality contributions to jet fuel and diesel." Cat crackers and cokers also yield olefins needed by alkylation and polymerization plants, products of which are high in octane, free of aromatics, and therefore important to meeting gasoline specifications.
Reconfiguration costly
Refiners can reconfigure high-conversion facilities to accommodate a lighter crude barrel—but not cheaply. In a November report for investors, Valero Energy Corp. said, "Depending on the constraint, solutions can range from $10 million to hundreds of millions [of dollars]." Encouragement to make that kind of investment could come only from prices of light crude low enough to drive heavy crude out of the market. That prospect can't please producers in tight-oil plays of the US or oil sands of Canada.
The ability to export crude, light or heavy, when needed to balance markets would relieve this potentially dangerous surplus developing on the Gulf Coast. Direct, light-heavy price competition would jeopardize production growth in the US and Canada without helping consumers, who buy oil products at prices tied to global markets unaffected by the pressure. The export ban was implemented to boost supply security. Retaining it contradicts that aim.
